Apple Inc (AAPL)

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Apple Investor Focus Shifts To Capital Return Plans
By: Investor's Business Daily | March 9, 2018

With enthusiasm fading for Apple's (AAPL) iPhone X product cycle, investor focus has moved to the company's plans to boost its returns to shareholders through dividends and stock buybacks.

Apple is expected to update its capital return plans with its fiscal second-quarter report in April. At that time, the company should provide specifics on how much of its repatriated foreign cash will be dedicated to dividends and buybacks. In January, Apple announced plans to bring home about $245 billion in foreign profits banked overseas to fund capital expenditures and other uses.

"We think Apple's solid free cash flow and $163 billion net cash balance will result in a meaningful step-up in capital allocation next quarter," RBC Capital Markets analyst Amit Daryanani said in a report Friday. "Given limited appetite to do deals and benefits from current tax reform, we expect Apple to return much of the ongoing free-cash-flow generation back to shareholders."

Daryanani believes Apple will continue to avoid doing large acquisitions. So rumors of Apple buying a company like Snap (SNAP) are likely false.

"Our baseline assumption (for Apple) is $59 billion in free cash flow annually, growing mid-single digits, which is utilized 60% ($35 billion) for buybacks and 40% for dividends (implies yield gets to about 2.6% vs. current at 1.3%)," Daryanani said. "Further, Apple could target incremental $25 billion-plus annual buybacks from balance sheet cash, implying total share reduction over the next 5 years could be about 1.6 billion shares (31% share reduction in total, about 7% annually).

Daryanani also ruled out Apple doing a special dividend from the foreign profits, noting that Apple CEO Tim Cook has explicitly stated that he is "not a fan of special dividends."

Apple shares rose 1.7% to 179.98 on the stock market today.

Daryanani reiterated his outperform rating and price target of 205 on Apple stock.

https://www.investors.com/news/technology/click/apple-investor-focus-shifts-to-capital-return-plans/?src=A00220&yptr=yahoo

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