“Since Apple began its capital return program in 2012, share buyback as rightfully received most of the press and attention compared to quarterly cash dividends,” Neil Cybart writes for Above Avalon. “Apple has repurchased $73 billion of its stock, nearly three times as much as the $27 billion spent on cash dividends. However, from a signaling effect, cash dividends may do more than share buyback in portraying management’s opinions and views about future business prospects. ”
“Management included language in its financial filings that Apple intends to increase its quarterly cash dividend each year,” Cybart writes. “Next month, during the annual review of the capital management program, Apple’s board will likely approve an increase to Apple’s quarterly cash dividend to approximately $0.50 to $0.51/share, up 8% from the current $0.47/share dividend, which would represent a 1.6% dividend yield at the current stock price. The board approved a 8% dividend increase last year.”
“Much of the significance underpinning Apple’s buyback and dividends has been lost on market observers as the focus remains on the near-term trade, ignoring capital management’s long-term signaling effect,” Cybart writes. “While share buyback and dividends (both cash and stock) do not guarantee positive stock price moves in the future, market observers can use such activity as an indicator for how management views the future. By issuing a cash dividend, management is showing confidence that the business is supportive of a recurring cash expense going forward in the form of the dividend.”
Read more in the full article here.
MacDailyNews Take:
Own Apple, don’t trade it. – Jim Cramer
MacDailyNews Note: Apple is expected to release fiscal Q215 earnings along with any dividend and buyback changes on April 22nd.