Apple Rising on Dividend, TV Chatter Post Goldman Talk

Shares of Apple (AAPL) are up $12.84, or 2.5%, at $522.30 this morning after an appearance yesterday afternoon by chief executive Tim Cook yesterday at the Goldman Sachs technology conference, where he was interviewed by Goldman hardware analyst Bill Shope.

The takeaway is that Cook’s remarks on the prospect of a dividend — he didn’t commit to anything but indicated a willingness to consider all options — and his discussion of the AppleTV product, are tantalizing hints at future actions.

For his part, Shope, who has a Buy rating on Apple shares and a $600 price target, in a note to clients this morning, writes, “We viewed the presentation as a positive catalyst for the stock [�] The company appeared remarkably confident in its incremental growth opportunities, and management seemed increasingly willing to explore a dividend or buyback.”

Shope went through each of the points brought up in the discussion:

• “Product innovation remans the core strategy and the company remains focused on making a select few products”
• Mr. Cook noted that supplier relationships and employee working conditions remain an area that the company will continue to aggressively monitor, and the company will remain transparent about any violations it uncovers
• With only a 24% share of the smartphone market and less than 9% of the handset market (in a peak seasonal quarter), Apple stressed that the size of the mobility market can field far more growth.
• Emerging market growth is taking off beyond the iPhone because of the “halo effect” from the iPhone, driving Mac and iPad sales.
• Mr. Cook continues to believe that the tablet market will ultimately exceed the size of the PC market.
• Siri and iCloud are “profound platform enhancements” and “Siri has proven to be a significant factor in driving adoption of the new iPhone 4S.”
• “Pointing to the company�s historic judicious and deliberate use of cash, Mr. Cook asked for investor patience as the company decides on what is in the best interest of shareholders.”

Regarding the discussion of AppleTV, Shope reiterated his own view that Apple “may be preparing to introduce a television in late 2012, early 2013″ given that “Mr. Cook hinted that they would need something more to go after this market more aggressively.”

R.W. Baird’s William Power, who has an Outperform rating on Apple, raised his price target to $600 from $550, “on what we continue to view as an attractive valuation and, in our view, the increased likelihood of a dividend.”

Apple’s CEO Tim Cook indicated that the board of directors continues to focus more time on the use of cash, which seems to increase the likelihood of a dividend and/or stock buyback. We continue to believe that even a conservative 2% dividend yield could help attract an additional wave of investors.

Jefferies & Co.’s Peter Misek, who has a Buy rating on Apple shares and a $599 price target, writes that “Tim Cook hinted that a bigger successor to the Apple TV is coming.”

“Also, he noted that capital allocation plans are actively being discussed. We continue to expect a dividend announcement later this year.”

Regarding the dividend, Misek elaborates:

On the dividend front Cook asked for time as the company likes to approach its capital allocation decisions “judiciously.” We believe it confirms our suspicion that a dividend is coming in H2:CY12.

Update: In a Bloomberg Television segment today, Robert Doll, chief strategist with BlackRock, was asked about a dividend prospect at Apple. He said “there is no dividend, positive free cash flow, lots of cash, so they can give us a dividend, raise it over time. With Apple, probably it’s just a few months.”