Will Apple Double Its Dividend?

A conversation with Apple (NASDAQ:AAPL) chief financial officer Peter Oppenheimer has led Morgan Stanley analyst Katy Huberty to predict that the company is likely to more than double its dividend this year.

The capital allocation practices of Apple, which currently pays out 2.3 percent in dividend, have been on the radar lately through the actions of hedge fund Greenlight Capital. The fund filed a court case against the company in an effort to stop it from start putting limitations on issuing preferred stock options to investors. The fund’s chairman, David Einhorn, has been outspoken about Apple needing to transfer more of its $137 billion in cash holdings down to shareholders.

According to Huberty, Apple is ready to take action. “Our analysis suggests Apple can match the S&P IT sector’s average [free cash flow] payout of 68 percent if it returns $28 billion in [fiscal year 2013], implying a 6 percent total yield,” she wrote in a note to clients on Friday, according to AppleInsider.

The analyst added that while limited cash flexibility had stopped Apple from rising payouts in the past — the company keeps a majority of its cash overseas — it could instead raise low-interest debt to solve that problem…