Investors love dividends, and what they love even more is companies that are in the business of raising their dividends regularly. Apple Inc. (NASDAQ: AAPL) is the biggest stock in the world by market cap, and it is the most profitable. Now that it has built up a cash arsenal of well over $100 billion, investors are very focused on Apple’s dividend, as well as the ongoing stock buybacks.

24/7 Wall St. has been identifying companies that will, or are expected to, raise their dividends or stock buyback plans. When Apple reports earnings this coming Monday (April 27), the one thing that may matter more than anything is Apple’s capital return plans.

It may not be a surprise that Apple should raise its dividend and buyback plan. What likely will be up for debate the most is the “How much?” factor.

24/7 Wall St. thinks that Apple is going to have to be aggressive in its dividend hike. It also seems a shoo-in that Apple would be a candidate to handily boost its stock buyback efforts.

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Apple may be still considered a cheap stock against the market for growth investors, but its dividend yield is a mere 1.5% or so. Keep in mind that Apple just recently was added to the Dow Jones Industrial Average. Now go one step further, and think about the notion that just recently it was shown that over half of the Dow stocks outyielded the 30-year Treasury bond. That is substantial.

Barron’s threw out a $160 Apple share price target in recent weeks, and that was in part due to higher dividends and buybacks. What is funny is that $160 is no longer even that ambitious for a price target. Here are some of the more recent Apple target prices, with links through to more detail about each analyst call:

• Wells Fargo was actually cautious, with a Market Perform rating and a $120 to $130 valuation range.
• UBS had Apple as a “Buy Into Earnings” with a $142 price target.
• RBC has an Outperform rating and $185 target.
• Argus outlined how Apple could ultimately hit $200 longer-term, with a more conservative near-term target.
• Maxim Group sounded cautious, with a Hold rating, but it has a $144 price target.
• Cantor Fitzgerald has a Buy rating and $180 target.
• Raymond James recently downgraded Apple to Market Perform from Outperform, based on valuation and targets.
• Canaccord Genuity recently raised its price target to $150 from $145.

So, Apple reports earnings on Monday after the markets close. Thomson Reuters has consensus estimates of $2.15 in earnings per share (EPS) and $55.91 in revenue. In the second quarter of the previous year, Apple posted EPS of $1.66 and $45.65 billion in revenue. Looking ahead to the fiscal third quarter, there are consensus estimates of $1.68 in EPS and revenue of $46.94 billion.

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While investors will clamor for data on iPhone 6 sales, the real behind-the-scenes issue on top of earnings and guidance will be how much Apple plans to return to shareholders via dividends and buybacks. There is a warning here, about which Tim Cook almost certainly knows: Apple investors will be severely disappointed if the dividend does not get lifted and if Apple does not plan to be increase its share buyback efforts.

Any word about sales of the Apple Watch will be an after-the-fact report. That is because the launch was after the end of the quarter.

24/7 Wall St. has evaluated dividend hikes for some time. Our projection is that the dividend will be raised from $0.47 per share to around $0.60 per share. It could of course be much higher if the company wanted to, but there are several issues that may keep the dividend hike from doubling or going crazy.

The quarterly $0.60 per share gets the yield to almost 1.9%. A $2.40 annualized payout would compare to the consensus estimate of $8.70 per share for 2015, a payout ratio of about 28%, not counting the buybacks — and it would be just over a 25% payout ratio (not counting buybacks) against the $9.38 EPS consensus estimate for 2016.

When technology stocks start paying dividends, they do not usually just all of a sudden jump up to 3% yields. That is where the dividends have ended up for Dow tech stocks (Intel, Cisco, Microsoft), but they take time to get there.

After Apple reinstated its dividend in late 2012, the first hike was by 15%. The second dividend hike, in 2014, was roughly 8%. So, why do we expect that the hike has to go up much more in 2015? The simple answer is that Apple’s yield has to go up to make a dent in the dividend game. Taking the dividend hike to $0.60 is nearly a 28% payout hike. Still, does it seem normal that Apple, which has not used any cash yet for mega-mergers, should have such a low yield?

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What about share buybacks? The amount of stock buybacks seems less clear going into the earnings report. Apple added $30 billion or so to its buyback plan last year, and the company has now spent more than $100 billion returning capital to shareholders since it began.

Nomura recently projected that Apple’s total capital return plan would be raised to a $200 billion target. That, of course, includes the $103 billion or so that we have already seen, plus whatever will have been returned in this past quarter, about which we are awaiting to get the details.

Apple should add about $75 billion in gross cash to its balance sheet this year. That figure is before accounting for buyback and dividend hikes. Before getting too crazy on the dividend and buyback versus the massive cash hoard, keep in mind that Apple had to take on debt to help fund the capital return plan. Much of its cash is overseas, as over half of Apple’s business takes place outside of North America. So that $175 billion or so in cash seen at the end of the most recent quarter may be hard to instantly use for dividends and buybacks without a tax penalty.

Apple was recently trading at $129.75, against a 52-week range of $0.57 to $133.60. The stock has a consensus analyst price target that keeps rising, most recently to $141.50 or so, but the highest analyst target price is now up at $185. One firm even outlined a $200 scenario.

There are of course at least some hidden barriers to dividend hikes and endless buybacks. That is on top of the currency issue for repatriating cash. We have seen warnings about the risks of dividends being raised too much as unsustainable. Also, Apple may be the tipping point for why dividends and buybacks at all-time highs are expected to rise even further in 2015.

So, as to why the dividend hike and the buyback matter so much: Apple’s market cap is roughly $757 billion now. Some analysts have projected that Apple will become the world’s first market cap to hit $1 trillion. That also includes buybacks. Apple has a dividend yield that sounds OK on the surface, but it is not really as impressive if you consider just how investors are valuing the stock.

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As a final look ahead to earnings, here was Apple’s formal guidance for its second quarter of fiscal 2015 issued with its most recent earnings report:

• Revenue between $52 billion and $55 billion
• Gross margin between 38.5% and 39.5%
• Operating expenses between $5.4 billion and $5.5 billion
• Other income/(expense) of $350 million
• Tax rate of 26.3%

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