Join        Login             Stock Quote

Apple Is Rich, Undervalued And Ready To Boost Its Dividend. So Why The Ongoing Slump?

 April 01, 2013 12:42 PM

Apple (AAPL) shares are off 13% this year through March 27, even as the S&P 500 Index (SPX) has climbed nearly 10% over the same period. The stock is undervalued by most standard fundamental measures and Apple optimists believe the company's share price will get a lift when CEO Tim Cook and the board boost - as is widely expected - the iPhone maker's dividend.

Investors such as David Einhorn's Greenlight Capital are also pushing Cook to consider issuing $50 billion worth of preferred shares that would deliver a 5% dividend. And Covestor manager Eric Steiman thinks Apple should consider one of the following paths: a one-time $89 dividend, a double dividend, a one-time share buyback, or ongoing share buybacks.

The fundamental point behind all such recommendations: Apple can't put its massive $137 billion-plus cash hoard to productive use and should therefore reward shareholders as growth slows. But Apple may be reluctant to share too much, given stepped-up competition from strong rivals such as Samsung, which just launched its Galaxy S4 smartphone.

Apple may boost its dividend by more than half, according to analysts surveyed by Bloomberg. (Cook reinstated dividends about a year ago after a 17-year hiatus under Steve Jobs.)  If that forecast proves accurate, the company would raise its quarterly dividend to $4.14 a share. That would in turn push Apple's dividend yield to about 3.6% (from the current 2.34%), a level higher than 84% of the companies in the S&P 500 that pay a dividend.

Would that be enough to lift Apple shares from a tailspin that has vaporized some $225 billion from the company's market capitalization since September? It's now neck and neck with Exxon (XOM) for most valuable company honors.

[Related -Apple Inc. (AAPL): iPhone Trending into Another Carl Icahn Disappointment?]

[Related -Apple Inc. (AAPL): How Q1 Earnings Will Fare?]

AAPL Market Cap data by YCharts

The reason for the share price slump now appears obvious: Apple's once white-hot earnings growth has cooled off in recent quarters. Analysts at both Pacific Crest and Piper Jaffray have recently published reports predicting that Apple earnings next fiscal quarter will come in below expectations, thanks to soft sales of large-screen iPads and iPhones.

Also, check out this interesting chart from Bespoke Investment Group, which matches up Apple's stock performance with Wall Street earnings estimates. The share performance has tracked earnings performance fairly closely. "Last September when AAPL was hitting all-time highs, the company was expected to earn nearly $13.50 per share this quarter," notes Bespoke.  "As of today, it's only expected to earn $10 per share this quarter."

Still an Apple bull? Check out Covestor Manager Libardo Lambrano'sDividend Paying Large Caps model. Apple is currently his portfolio's biggest holding.



Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageBogle Says Indexing Destined To Win The Battle Of The Quants

Vanguard founder John Bogle gave a powerful speech last month at the Q Group’s Spring Seminar that lays out read on...

article imageVMAX and VMIN Poised to Be Most Important VIX ETP Launch in Years

REX Shares is launching two new VIX exchange-traded products on Tuesday in what is likely to be the most read on...

article imageThe April 29 Gold Triangle Breakout Update

If you’re just watching stocks, you may be missing this powerful Triangle Breakout surge in read on...

article imageSell In May, But It Is A Presidential Election Year

With May just around the corner, articles covering the "Sell in May' phenomenon are not in short supply and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.