Morgan Stanley expects 6% dividend after meeting with Apple CFO

“Morgan Stanley analyst Katy Huberty recently met with Apple Chief Financial Officer Peter Oppenheimer,” Neil Hughes reports for AppleInsider.

“With Apple’s cash balance $40 billion higher than it was in March of 2012, Huberty believes the company will likely return more cash to shareholders,” Hughes reports. “She believes the iPhone maker could match the S&P 500 IT sector’s average free cash flow payout of 68 percent.”

Hughes reports, “At that rate, Apple could return $28 billion to shareholders in fiscal year 2013, which would imply a 6 percent total yield on the company’s dividend. That would be a major increase over Apple’s current $2.65 quarterly dividend, which carries a 2.3 percent yield.”

Read more, including info about the potential of a lower priced iPhone, in the full article here.

26 Comments

  1. The biq question would be how they intend to pay for that. Huberty suggest Apple borrow money to fund a 6% dividend.
    Dividend should only be paid with the companies own cash. As a shareholder I personally would love an increase in the dividend yield only if is was fiscally sound.

    1. Apple could borrow cash at a significantly lower rate than their offshore cash is now earning — meaning: the fiscally sound thing to do would be borrowing money to pay an increased dividend. They save money. Which is fiscally sound. And preserves the balance sheet. Which is good for shareholders. Basic economics which is completely lost in this unfortunate day and age of clueless armchair debt/deficit hawks

      1. It makes no sense for Apple to carry a debt burden of $28B in order to pay for a dividend. Remember that this dividend would be paid every quarter of every year so Apple would have to continue to borrow money. Apple have to have a means of paying the debt of and they will not be able to do that solely on the interest differential on their own cash holdings and the proposed chart.
        It makes sense to borrow to provide liquidity to grow the business. Apple have plenty of cash to fund that themselves.

        1. You’re assuming they will continue parking profits offshore after an increased dividend. Logic tells us that if the dividend is increased, they would reevaluate this position and adjust it accordingly so as to not perpetually borrow to pay – borrowing makes sense now, with historically low borrowing rates – with a cash allocation adjustment to follow later

          1. Apple does not “park” money offshore. It makes a profit overseas and the money stays overseas due to the US desire to get taxes on money already taxed at the rate where it was made.

            Money made overseas is used to pay for hardware built overseas

            Just a thought.

      2. If Apple can really borrow money more cheaply than it can make on its cash, why doesn’t Apple (and every other company on the planet for that matter) get 100% out of the hardware and software business and just make money that way? Hell, this would be a perpetual motion money making system — if it were true.

        If I could consistently and reliably make money off of borrowed money, then I’d be borrowing money and making money and NOT working.

        There are many schemes out there that put forth that you can do this. Some even occasionally work over the short term. But I can tell you from personal experience dealing with several international banks that none — NONE — of these schemes are guaranteed and even for those few that sometimes do work, NONE of them work long term.

        1. Nothing is guaranteed. Yet during a time of 30 years of declining wages, corporate profits are at an all time high. Since the economy crashed in 2007, corporations have soared — because of interest rates that basically equate to free money — all I’m saying is AAPL can take advantage of this free money – in the near term – to pay the increased dividend everyone clamors for — moving forward the dividend would be paid for sans borrowing by simply parking the needed money stateside, and funneling the rest offshore. Temporary. Not perpetual. And the borrowed coin is paid off before the current fiscal year closes

          1. “Yet during a time of 30 years of declining wages”

            Really? I’m sure some jobs pay less than they did 30 years ago (ie those jobs do not exist) but some jobs pay more. So how do you make such a statement without creating a false perception?

            I’d like you to name a job that existed 30 years ago that is not paying more. Even if you do it doesn’t mean anything because other jobs have increased in pay (ie medical and computer related jobs) making your statement false.

            Also, what do you expect corporate profits to do while the money supply grows (ie inflation). Have you checked movie prices and the wages entertainers get? How about sports? And the list goes on. Your statement is false and typical of a corporate hater.

            1. And I work in the entertainment business – don’t talk things you know zero about – 15 years ago A-list talent made 20m a picture – they’re lucky if they get half that now – and the studios have never made more money than they do right now – which is fine – a wage should be determined by what the market can bear – yet that’s not what is happening – hospitals have never made more than today, yet doctors’ pay has declined steadily (adjusted for inflation) over the last 30 years – and yea, the job market looks different today, no shit, consumers drive innovation and sector creation – the fact is: adjusted for inflation, the consumer has less to spend today than 30 years ago, and the corporation, adjusted for inflation, is currently seeing record, unprecedented profit – this has nothing to do with hating corporations, and more to do with pointing out that, economically, the market can bear a higher wage and increased hiring – yet that’s not what we’re seeing. It’s an observation, based on numbers and math, not politics.

            2. In Canada, this year, for the first time, you will have more people retiring this (baby boomers) than those 15-24. It will be the same for the next 7 years. In 1961, people moms had 4 kids on average. Today, it’s 1.7. And no, immigration can NOT make up the difference. Simple demographics. In addition, boomers are living longer. 80% of care is consumed in the final years of life.

              This means more pressure on pensions, higher taxes or reduced benefits.

              Immigration can’t fill this gap in Canada… with 500k retiring each year and 250k immigrating.

              For the US, you can approximated multiply those numbers by 10, although there is LESS immigration in the US(%12 immigrants) than Canada (~20% immigrants) according to http://peoplemov.in.

              We’re in for a decade of slow economic growth, but high corporate profits fueled, in part, by low wages. Corporations are preparing for financial famine. Though wages overall are dropping, the cost of living is going up!

            3. How many A-listers who are demanding double digit millions not getting it? None of which I am aware. Part of the issue is that there is a new, younger crop of talent moving up. Part is that the A-listers of 15-30 years ago have either moved on and are making fewer films or moving into production/direction jobs. Part is that some of them don’t need/want/demand the money like years ago. Besides, at that time, many of the studios were struggling. Now the pendulum is swinging the other way. And I was an active member of the Hollywood Post Alliance — so I do know about that industry.

              MD’s, at least some of them, made an obnoxious amount of money. Hospitals were struggling — some even closing — while the docs were the rich ones. Again, the pendulum is swinging.

              If you bother to actually read the labor reports you will see that the *average* worker over the past 30 years has done a just bit better than inflation. Not a lot better, but better. The disparity is that the so called 1% group has done a LOT better than inflation, as a general rule. And yes, each of us can pick a job where the wage has gone way down or way up. It’s easy to pick anomalous data points.

              And corporate profit? That depends upon the corporation. Just check out companies like Fiskar. An up and coming darling just a couple of years back — even got a huge U.S. Government guaranteed loan and investments by a lot of individuals. They went with the wrong battery company and now they’re on the verge of bankruptcy.

              And to your last point… Apple is hiring. Even more than most. Apple has boosted wages — even to the point of giving money to subcontractors not in the U.S. so that the subcontractors boost wages. So what is Apple doing you don’t like?

          2. Your statements make no sense.

            There is no “free money”. Interest rates on borrowed money is higher than any low risk return on cash anywhere on the planet. How much international banking have your *really* done — or have you heard of all the get rich schemes and believed them?

            You seem to be saying that Apple should borrow huge sums (at some fictitiously low interest rate) to pay a big dividend now then both pay it back AND pay near future dividends by “by simply parking the needed money stateside”. Have you never heard of the issue about bringing about 2/3 of Apple’s cash back into the U.S. and the huge tax hit that would cause? There goes the money you with which you were going to pay that loan! There goes the money with which you were going to pay those near future dividends!

            Temporary financial solutions are not to be taken — ever — unless you are forced into it. Your plan does not hold up long term — and some aspects are completely flawed.

  2. I’m waiting to see the Joy of Tech comic where masked Wall Street fund managers are demand of Tim Cook: “Gimme all your cash!” And Tim’s thought balloon asks, “Does the 2nd Amendment cover corporations, too?”

  3. Don’t count on it! APPLE executive team isn’t that stupid.
    Wall Street should just keep dreamin Apple billions and billions
    ahhhhh! sooooooo yummy, so close and yet so far. lol

  4. Whatever Apple returns to investors will not be enough to satisfy the hedge fund managers and analysts. They will keep demanding more.

    Apple would do better to hang on to it’s money and do something strategic with it by investing in businesses that will complement Apple’s operations.

  5. It’s a damn shame Apple has to go through hoops to keep its share value up when a company like Google doesn’t have to do anything to return value to shareholders. Google is heading for at least $900 and no one is asking them to split, buyback or give dividends or anything. Even if Apple gives a larger dividend it isn’t going to change Wall Street’s perspective of Apple’s non-existent future and the P/E will continue to drop. I still prefer Apple use the money for some large acquisition like a search engine and use those off-shore cash reserves for increasing overseas production facilities manned by robots.

    As a long-term shareholder I’ll have to settle for dividends since Apple’s share price isn’t going up in the foreseeable future. I feel Apple has to move further away from hardware to make any appreciable gains. Get away from all this hardware competition which is only resulting in further loss of product market share. Apple could pour billions of dollars into an overseas search engine for a pittance of its cash reserves.

    1. I agree, borrow for growth, but if apple’s hand is forced by a declining market cap, I’d rather see them borrow at today’s rate than use the money pile they’re sitting on that is more than likely earning interest at a significantly higher rate than the rate they’d pay in a temp borrowing solution. Why does everyone think apple’s “cash” is just sitting somewhere, uninvested, piled high, doing nothing — it’s invested, appreciating, working — pay a dividend, fine, just don’t use more money than you need to use doing it.

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