Apple Inc. (NASDAQ:AAPL) will deliver its earnings report for the first three months of the year, a period it records as its second quarter of 2015, next Monday afternoon and there’s just one thing on the minds of the company’s investors. This report won’t be about the Apple Watch or even the iPhone, it will be about the company’s capital return program.
With most analysts settling on a 10% increase in the company’s dividend, buying Apple for income is still worse than other options, but it might just spark another jump in the company’s share price. Meanwhile there’s likely to be no numbers about the Apple Watch released this time around, and the iPhone sales effect on the share price are questionable for the time being.
Investors concentrate on dividends
Apple increased its dividend by 14% in 2013 and 8% last year. If the company decides to do less than that this year questions are going to be asked of the company. Either it’s back to hoarding cash, a habit that investors often had a problem with, or the company is nervous about being able to keep paying the dividend in future.
Ameritrade chief strategist JJ Kinahan said on CNBC today that one of the reasons people are buying into Apple stock is for income.
Gene Munster, managing director at Piper Jaffray reckons that a $150 billion capital return program is on the way.
No company likes to have to reverse dividend growth, so Apple is going to be reluctant to raise its dividend if it thinks that might be on the cards. With the second quarter having been a quiet one for the company’s accounts, the dividend might be the most important information that the company lets out into the public this time around.
Dividends say a lot about Apple
The reason that investors are so interested in the Apple dividend program isn’t necessarily the extra income, it’s what the numbers say about the company’s expectations for the future. If Apple’s own research says that last year’s iPhone sales were the expression of pent up demand rather than an ongoing process by which the company will continue to dominate, the dividend increase will be generous.
If, however, Tim Cook and the rest of the Apple management team reckon that the company’s results may have been outsized last year, and that those sales aren’t repeatable with the products they have in the chamber there may be a smaller move on the dividend.
Right after reading the headline numbers, investors are going to be looking directly at Apple’s plans for its dividend and other capital returns in the year ahead. The market wants to know whether Tim Cook believes that Apple can continue his incredible run, and the dividend decision is likely the best indicator of that.