“Apple should update its dividend and share buyback plans in April, probably on the same day that it announces its March quarter results.,” Chuck Jones writes for Forbes. “UBS’s Apple analyst, Steve Milunovich, published a note that reinforces what I have written that Apple’s debt load combined with so much of its cash held overseas could limit how much it will increase its dividend and stock buyback. (Note that I have sold my Apple shares and closed my short Call position. This is a trading move so I may get back into the shares.)”
“I believe the key points to keep in mind besides the debt load and overseas cash is how much profit and cash the company can generate in the US and that Apple will take a multi-year outlook, especially on the dividend and what it essentially obligates the company to pay and grow,” Jones writes. “Management and the Board know that investors want to not just feel safe about the payout but that the company can continue to increase it every year.”
“I believe Apple will increase its dividend somewhere between 6% to 9%. The main reason that it won’t be higher (besides that last year it went up 8%) is the compounding impact of doing this over a five to ten year timeframe,” Jones writes. “A key limiting factor is only being able to pay dividends from US cash flow, additional debt or bringing back overseas cash and paying additional taxes on it, which I don’t believe Apple would want to do.”
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