By Dhirendra Tripathi
Investing.com – Apple (NASDAQ:AAPL) shares rose 0.5% Monday after Wells Fargo (NYSE:WFC) said it expects the iPhone maker to announce an additional $50 billion buyback when it declares its earnings on April 28.
Buybacks reduce the total share size of the company and boost EPS. Companies resort to buybacks when they think their stock price is low or when they have excess cash. In Apple’s case, it’s the latter.
Wells Fargo analyst Aaron Rakers reiterated an overweight with a $160 target. That’s 18.5% higher than the stock’s current price.
“Alongside F2Q21 results, we expect the company to announce an increase to its share repurchase authorization of~$50B, which compares to increases of $35B, $100B, $75B, and $50B in 2017, 2018,2019, and 2020, respectively,” Rakers wrote.
But, according to the analyst, a bigger driver of the stock could be an increase in the dividend.
“Additionally, and perhaps a more important near-term driver of shares, we believe Apple could announce a dividend increase of +10% or more given significant FCF generation,” he said.
If it happens, the dividend hike would be the highest since 2018, when the company announced a 16% dividend increase. It would mark Apple’s return to around 10% annual dividend growth trajectory, up from +5.5% and +6.5% increases in 2019 and 2020, respectively, according to Rakers.
In a not-so-related development, the Cupertino, California-based company will allow Parler to be back on the app store. The move follows improvements the right-leaning social media company has made to moderate hate speech and incitement, according to a letter Apple sent to Congress.
Apple removed the app from its store after the Capitol riots, citing Parler's refusal to remove the hate content posted on the platform.