Is The Options Market Betting Against Apple Inc. (AAPL)’s Recent Rally?

However, if you consider the amount of unrest that is gathering within Apple’s investor base, as partly evidenced by its 40% pullback and enormous cash position, it seems that some type of meaningful dividend increase is likely to be in the cards. In Apple’s official statement from earlier this week, it specifically said, “Apple’s management team and Board of Directors have been in active discussions about returning additional cash to shareholders.” [Emphasis added.]

Apple’s statement implied that thinks it needs only about $100 billion in cash for operations, meaning it has plenty left over. The company generated $23.4 billion in operating cash flow last quarter alone, and its total cash balance increased by $15.9 billion sequentially. At the rate that Apple is generating cash relative to what it says it “needs,” within the context of disgruntled investors, I’d say the chances of a substantial dividend increase before year’s end is highly likely.

Otherwise its cash position will start to approach $200 billion, and if you thought investors were irritated now, how do you think they’d feel then? The increasing investor agitation is commensurate with Apple’s excess cash, and no company likes agitated shareholders. The options market is underpricing the likelihood of an Apple dividend increase.

The article Is The Options Market Betting Against Apple’s Recent Rally? originally appeared on Fool.com and is written by Evan Niu, CFA.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends and owns shares of Apple.

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