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Wednesday, April 02, 2014, 07:54 am PT (10:54 am ET)

Apple predicted to announce 'modest' increases to share buyback & dividend in next earnings call

The highlight of Apple's next quarterly earnings call later this month could be moderate increases to the company's share buyback program and dividend payouts to shareholders, many investors reportedly expect.

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Gene Munster of Piper Jaffray said in a note to investors on Wednesday that he expects Apple to announce an increase for its share repurchase program, as well as its quarterly dividend, in its next earnings report on April 23. Munster said most buy-side investors agree with this line of thinking, representing Wall Street's expectations going into the announcement of March quarter results.

According to Munster, this belief is likely already priced into shares of AAPL, so any announcements come April 23 may not have a significant effect on the company's stock price.

Apple has been under investor scrutiny for sitting on a pile of cash that was at one point near $160 billion. Facing pressure from Wall Street, the company responded by buying back billions of dollars worth of its own shares, and also paying out a quarterly dividend that is currently at $3.05 per common share.




Regarding Apple's actual performance in the March quarter, Munster believes the results will come in on the high side of the company's guidance, which called for revenue to between $42 billion and $44 billion. He noted that in the four quarters since Apple began giving its more "realistic" guidance ranges, it has tended to report toward the high end.

Wall Street generally expects Apple to report revenue of $43.5 billion in the March quarter.

Looking ahead to the June quarter, Munster said current expectations are for 10 percent year over year growth. His own estimates call for Apple to grow 5 percent in the June quarter, though he believes that those results "will be largely ignored" as investors look toward product updates in the second half of the year.

Munster believes investors should buy in to AAPL stock, as he has high hopes for the company's product refresh cycle in the second half of 2014. He said most meetings with investors over the last month have shown that many on Wall Street are skeptical that this year's new products will have a meaningful effect on shares of AAPL, but Munster disagrees.

"We think that buy side expectations for the impact of iPhone 6 and new product categories are relatively low, suggesting upside to shares if the products ultimately are more meaningful," he wrote. "Worst case it seems that an in-line product cycle would mean that shares do nothing."