updated 10:17 am EST, Fri February 22, 2013
Calls for 6 percent dividend in FY 2013
Apple will probably release a cheaper iPhone, says Morgan Stanley analyst Katy Huberty in the wake of a meeting with Apple CFO Peter Oppenheimer. Huberty says that innovation is still a "top priority" for Apple, and hence why she anticipates a bigger iPhone lineup, as well as unspecified services that could help "unlock significant value" and fuel further device sales. If it managed a one-third cannibalization rate and a gross profit margin of 40 percent, a low-cost iPhone could push up Apple's overall revenue and profit, Huberty suggests.
The analyst also argues that the company will probably return more cash to shareholders, possibly matching the average free cash flow payout in the S&P 500 IT sector, 68 percent. That would translate into about $28 billion in shareholder payouts for Apple's fiscal 2013, or a 6 percent total yield on the company's dividend. At the moment Apple's dividend has a 2.3 percent yield. Paying out the higher figure would involve borrowing cash, but Huberty proposes a workaround involving raising low-interest debt.