Market watchers are expecting Apple to reward shareholders with a fatter dividend and heftier stock buy back when the company reports first quarter earnings this month. Analysts, however, are divided on the size of those payouts, and just how much they should actually matter to investors.
Apple has spent $57 billion on buybacks and dividends in the last year, more than any other company in the S&P 500 during that period. The company still prefers buybacks to dividends—it bought about $44 billion of its own shares last year. Adding to the speculation is the fact that the tech giant has issued dividends in its last two April reporting periods.
Citibank analyst Jim Suva thinks the company cannot ignore shareholder demands for a richer dividend, especially when blockbuster iPhone 6 sales are driving improvements in profit margins and average selling prices.
"Everyone is talking about the problem Apple has: too much cash on hand," he told CNBC's "Fast Money" on Wednesday.
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Suva believes Apple will hike its $1.88-per-share annual dividend by at least 10 percent, and increase its stock buyback from $90 billion to $120 billion when it reports earnings on April 27. That would leave Apple plenty of cash to embark on mergers and acquisitions, develop its new headquarters, and continue hiring, he said.
Apple began paying dividends in 2012 after a 17-year hiatus. Its quarterly payout at the time gave the stock a 1.76-percent yield. In 2013, the company boosted the yield to just above 3 percent.
In 2014, Apple raised the dividend 8 percent, but with its share price on the rise, the yield only increased to 2.5 percent. The continued rally in Apple stock has reduced the yield on that dividend to 1.5 percent.
Shares of Apple are up about 60 percent over the last year to $124. For Apple to pay out 2 percent of its $725 billion market value would cost about $14.5 billion a year, or less than a quarter of its operating cash flow last fiscal year.
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Scott Kessler, S&P Capital IQ analyst, thinks Apple will raise the dividend by as much as 8 percent to 15 percent. Based on its current stock price around $125, the yield would increase to between 1.6 percent and 1.7 percent.
"People are expecting at least an update [from Apple]," said Kessler. "Based on past experience, it would be reasonable to expect that in the last week or two of April.''
Meanwhile, RBC Capital Markets analyst Amit Daryanani said Apple could hike the payout by as much as 50 percent, noting that would put the yield around 2.25 percent—still lower than peers such as Microsoft and Intel, as well as the S&P 500 average.
Stop talking about the dividend!
Not everyone agrees that investors should be focused on Apple's dividend.
"At the end of the day, tech is about growth. If they were just doing the buybacks and they weren't growing earnings, then the stock wouldn't be up," Hudson Square Research's Daniel Ernst told CNBC's "Squawk Box" on Thursday.
Ernst noted that Apple revenues grew 32 percent year over year to $75 billion in the last quartefr, outpacing Facebook's growth for the entire year.
In the quarter that ends this week, analysts think Apple earned $2.12 a share on $55.46 billion of sales, up from $1.66 a share in the same quarter last year. Sales are expected to rise 21 percent, led by the introduction of the iPhone 6 line last September.
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Ernst cautioned investors about playing checkers over chess with Apple, saying it is "a long-term growth story."
"You buy Apple stock because you think for the next five, 10, 20 years, they're going to continue innovating and growing top line and bottom line like they have for the last 15, 20," he said.
—Tim Mullaney and CNBC's Maneet Ahuja contributed to this story.