New York: Apple is poised to boost its dividend by more than a half, according to analysts, providing investors hit by a share slump with one of the highest yields in the US technology industry.
Apple will probably lift its quarterly dividend 56 per cent to $4.14 a share, for an annual payout of $15.7 billion, according to the average estimate from six analysts. The resulting yield of 3.7 per cent would be higher than 86 per cent of the firms in the Standard & Poor's 500 Index paying dividends. Apple could fund a payout with existing cash flow without using profit from overseas, which can be subject to extra taxes, said Gene Munster, an analyst at Piper Jaffray.
Tim Cook, chief executive, who a year ago this month reinstated a dividend and announced a $10 billion buyback, faces mounting pressure to take bolder steps to pay out more of Apple's $137.1 billion in cash and investments. Investors including David Einhorn's Greenlight Capital are pushing for more money as growth slows and competition from rivals such as Samsung Electronics intensifies.
"The accumulation of cash has become excessive," Brian White, an analyst at New York-based Topeka Capital Markets, said in an interview. He rates the shares a buy, with an $888 price target. "It doesn't matter which bearish scenario you forecast, they're never going to need this much cash."
Apple shares rose 2.6 per cent to $443.66 at the close on March 15. The stock has declined 37 per cent from a peak on September 19, compared to a 6.8 per cent gain for the Standard & Poor's 500 Index in the same period.
Many companies announce dividend changes once a year, fuelling speculation about Cook's plans as Apple approaches the anniversary of last year's announcement, which came on March 19. The chief executive reinstated dividends after a 17-year hiatus, breaking with a pattern set by co-founder Steve Jobs, who sought to preserve capital. Dividend predictions from analysts surveyed range from $3.31 to $5.30 a share.
Apple has said it's in active discussions over how to manage the cash, and considering buybacks or a higher dividend among other options. Steve Dowling, a spokesman for Cupertino, California-based Apple, declined to comment on the company's plans for the dividend or repurchase programme.
Apple may add about $40 billion to $42 billion to its cash balance this year, according to Laurence Balter, an analyst at Oracle Investment Research who rates Apple a buy. Apple will generate about $15 billion of that in the US, he estimates, meaning it could pay that out in dividends without incurring taxes from bringing cash back from overseas.
"There has been almost a $300 billion decline in value of this company," Balter, based in Fox Island, Washington, said in an interview. "Any chief executive at the helm of any United States or international company that sat at their desk idly while this happened would be shown the door."
Balter estimates Apple could spend $10 billion in a one-time payout, while boosting the quarterly dividend to $3.31 a share. Apple generated $42.6 billion in free cash flow in fiscal 2012, a 28 per cent increase from a year earlier.
Einhorn's Greenlight, which says it holds more than 1.3 million Apple shares, is urging Apple to issue high-yielding preferred stock to carve out more cash for investors. Greenlight successfully sued to block a vote at Apple's shareholder meeting last month that would have required the company to seek investors' approval for creating preferred stock.
Apple could increase its payout incrementally. The firm may raise its current quarterly payout of $2.65 by 13 per cent.