Apple could easily double its dividend and still just match other tech company payouts: Analyst

• Longbow Research predicts Apple will significantly raise its dividend and stock buyback authorization.
• "We see Apple substantially increasing its capital return program given the incremental cash provided from U.S. tax reform and Apple's pledge to reduce its net cash position to zero over time," the firm's analyst writes.

Tim Cook, chief executive officer of Apple Inc.

David Paul Morris | Bloomberg | Getty Images

Apple should significantly increase its capital return to shareholders, according to one Wall Street firm.

Longbow Research said Apple could double its dividend and have its payout level still be in line with its large technology competitors.

"We see Apple substantially increasing its capital return program given the incremental cash provided from U.S. tax reform and Apple's pledge to reduce its net cash position to zero over time," analyst Shawn Harrison wrote in a note to clients Friday. "Apple should double its dividend to align its payout ratio to that of large-cap tech peers."

Harrison said Apple currently pays out just 26 percent of its free cash flow compared with an average of 43 percent for its large-cap technology peers. He noted even if the company doubled its dividend, it will have more than $40 billion per year of free cash flow to buy back its stock for its fiscal 2019, boosted by corporate tax cuts.

Despite Apple's likely large future capital returns, the analyst reiterated his neutral rating on the company's stock.

"Short-term, we remain cautious on the iPhone vs. consensus while highlighting that other near-term positives in terms of services growth and accelerated capital are known to investors," he wrote.

Apple is slated to report its fiscal second-quarter earnings results on May 1, according to its website.

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