Analyst: Apple’s repatriated cash ‘front and center’ tomorrow

On the eve of the annual Apple shareholders meeting, investors look to Tim Cook for strategy and timing.

From a note to clients by GBH Insights’ Daniel Ives that landed in my inbox Sunday:

This Tuesday Apple will be holding its annual shareholder meeting at the Steve Jobs Theater on its Cupertino campus with all eyes on Tim Cook and his strategic outlook for the coming year. This meeting comes at a crucial time for Apple as the company has seen a myriad of challenges over the last few months including softer than expected demand on its flagship iPhone X model, a delayed HomePod which missed the crucial holiday season, and shares which have been under considerable pressure and causing agita for tech investors thus far in 2018…

Apple continues to transition from a growth to value name as the company’s massive war chest and $200 billion+ of repatriated cash is now front and center for the Street as investors hope to get some further tea leaves on Apple’s cash strategy/timing as well as product vision for 2018 at this week’s highly anticipated shareholder meeting…

To this point, we believe the combination of a new $300 billion buyback program, a dividend hike of between 10% to 15%, and a special cash dividend of $15 billion could be announced in the April timeframe as Apple deploys all of its repatriated cash.

My take: Don’t count your chickens. Apple usually announces changes in its dividend and buyback programs at the end of April or early May, when it reports its March quarter results.

4 Comments

  1. Gary Morton said:

    Tim Cook and Luca Maestri provided a conceptual framework for the upcoming revisions to the capital return program in the FYQ1 2018 earnings call. Based on their framework, I wrote an article on Seeking Alpha that made an attempt to show the potential impact of Apple’s newly found flexibility with their cash and what it would mean for shareholders over the long haul. In the near term, my projection is consistent with what Ives is forecasting with one exception. I did not include any provision for a one time special dividend. Long term shareholders, would be much better off with a large increase in the quarterly dividend and then annual increases from the new higher base. A one time special dividend has little to no impact on investor sentiment, opinion on Wall Street, PE multiples, or valuation metrics because there is no future value after it is paid. A large bump-up in the regular dividend, on the other hand, increases forward dividend projections and makes the stock more interesting for value and dividend investors.

    3
    February 12, 2018
  2. Tommo_UK said:

    Apple shareholder meetings are generally handholding exercises and a chance for mom and pop investors to throw rotten tomatoes or twinkies (depending how the company’s doing) just because they can. I doubt we’ll hear anything significant , which may in itself let some air out of the stock considering what a talking point the stock has become ‘around the analyst water cooler’ and the magnitude of today’s rise.
    On the other hand, given where the stock is and its terrific recovery today (with hours to go), perhaps Apple is already executing its buyback plan hand over fist and will add some colour to their plans tomorrow after all, for a change, in which case I think the market would be very much taken by surprise and react positively.
    Maybe this will be the one shareholders meeting to really matter in awhile, but I’m not putting money on it.

    1
    February 12, 2018
  3. Gregg Thurman said:

    “At Apple’s current valuation, repurchasing of shares should be prioritized over a large bump in the dividend (i.e. > 15%).”

    I agree, and its what I would prefer Apple to do. Dividends have done little, if anything, to increase AAPL’s valuation, whereas EPS growth has a direct bearing on valuation.

    0
    February 12, 2018

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