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Daryanani: Apple Will Hike Dividend, Up Buyback By $50 Billion In April

Daryanani: Apple Will Hike Dividend, Up Buyback By $50 Billion In April
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RBC Capital Markets’ Amit Daryanani maintained an Outperform rating for Apple Inc. (NASDAQ: AAPL), with a price target of $130. He expressed optimism regarding the company being able to “comfortably” increase its capital allocation program to include share repurchases of $50 billion and hike dividend by 10-15 percent.

Apple has $30 billion remaining in its current share buyback plan. Daryanani believes the company could announce an additional buyback authorization of $40-$50 billion during its April EPS call. This buyback would up Apple’s EPS by about 4 percent in FY16 and beyond. Daryanani added that the expected dividend hike of 10-15 percent implies a yield of 2.3 percent.

Related Link: PayPal Investors Overreacted To Apple Pay News, Says Goldman Sachs

FCF Generation

The analyst expects Apple to be able to generate FCF of $69B in FY16, and sustain +10 percent FCF growth in the out years, in-line with growth in operating income. He estimates 41 percent of FCF to be generated is in the US and the remaining overseas. Apple currently has $216 billion of net-cash on hand.

“In aggregate, given the $65B+ FCF potential AAPL could implicitly commit to returning 100% of annual FCF to shareholders over time (specially given the $200B+ cash on hand),” Daryanani commented.

Shares of Apple traded recently at $105.67, unchanged on the day.

Latest Ratings for AAPL

Jan 2018Longbow ResearchDowngradesBuyNeutral
Dec 2017InstinetDowngradesBuyNeutral
Nov 2017Wells FargoReinstatesMarket PerformMarket Perform

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