With the recent news of hedge fund manager David Einhorn filing suit against Apple Inc. (NASDAQ:AAPL) to block a?shareholder proposal that he perceives as limiting returns from the company of its $137 billion cash hoard, again the issue of Apple?s dividend is at the forefront.
And on Friday, the Susequehann options team took a look at Apple’s options and the inclusion of a seven percent dividend increase that would go through January.
In a morning research note by the group, they wrote via Barron’s, ?We find that the option-implied dividend has increased only slightly over the past week, with the options continuing to price in largely the status quo over the next year or two.?
The team then reviewed the makings of the ?synthetic stock price? that shows upcoming ?dividend streams, but they note it hasn’t exemplified a big lift regardless of the all the recent divided talk.
They write:?
Options positions can be combined to create a ?synthetic stock position,? similar to a future on the stock. A combination of long call and short put in the same strike and same expiration (often referred to as a ?combo?) can effectively replicate the performance of the underlying asset […] In an effort to identify any shift in sentiment regarding AAPL?s dividend policy in recent days, we will compare the market value of one January 2014 combo as of yesterday?s close to its value as of last Friday. First, we look at the value of the January 2014 500 combo as it appeared as of last Friday?s close, when the stock closed at $453.62. At the time, the 500 calls were trading mid-market around $26.73 while the puts were trading mid-market around $80.93, setting up a combo worth ($54.20). Based on our interest rate assumption, this implied a cumulative dividend stream of $10.22 expected over the next four quarterly dividends […] Yesterday, the 500 calls closed around $35.40 and the 500 puts closed around $72.95, setting up a combo worth ($37.55). Importantly, we must account for the fact that the stock actually paid out one quarterly dividend in the interim (stock went ex yesterday), so we should automatically expect that $10.22 cumulative dividend to decrease by $2.65, resulting in a total expected cumulative dividend around ~$7.57 if all else remained equal. In fact, once we calculate the implied dividend stream using yesterday?s markets, we find that the total implied dividend of ~$8.13 is only up slightly […] After accounting for this week?s $2.65 dividend, it appears that the remaining January 2014 cumulative dividend (three expected quarterly dividends) increased only moderately, from ~$7.57 to ~$8.13, or ~$0.56 over three remaining dividends. Again, there are multiple assumptions involved in our implied dividend calculation, and we would not recommend viewing the outputs as precise market expectations.”
On Feb. 27, Apple will hold their shareholder meeting. Before then, Apple CEO Tim Cook will speak on Tuesday, Feb. 12 ?at the Goldman Sachs technology conference held in San Francisco. His remarks begin at?1:15 pm, Pacific Time.