Why Apple's Still a Buy (Update 1)

Updated from 11:43 a.m. EST to provide more analysis from Goldman Sachs analyst in the sixth and seventh paragraphs.

NEW YORK ( TheStreet) - Apple ( AAPL) has surpassed investors' wildest expectations, and with the announcement of a dividend and a share buyback earlier this week, shares are more attractive than before, according to investment managers.

Investors had been urging Apple to return some of its cash to shareholders, and with the announcement that it will pay a dividend and buy back $10 billion in stock, investment managers see plenty to like.

Even though Apple shares have gained 46.5% year-to-date and 79.5% over the past twelve months, Daniel Morris, portfolio manager of the Manor Growth Fund ( MNRGX) says shares are still "attractively valued at these levels."

"We think it's a good move, and appropriate. We look at this as fairly conservative, and they could raise the dividend in the next few years. If I was not a holder, I'd be a buyer here," Morris said over the phone. Morris has owned Apple since 2006 for his clients, and due to position limits, he cannot add anymore Apple.

The dividend announcement caused several analysts to boost their Apple price targets, including Goldman Sachs.

"In addition, on the conference call this morning, we believe Apple's management appeared very willing to consider steady increases in the dividend and share repurchase rate over time," Goldman Sachs' Bill Shope wrote.

Shope raised his earnings estimates for 2013 and 2014. He now sees Apple earning $50.57 per share in fiscal year 2013, up from $50.29, and $57.90 per share in 2014, up from $57.14. He left his fiscal year 2012 earnings per share estimate of $42.52 unchanged. He raised his price target to $700, and reiterated his Conviction-Buy List rating.

Despite the 1.7% dividend yield as of yesterday's close, Oliver Pursche, President of Gary Goldberg Financial Services and manager of the GMG Defensive Beta Fund, said in the short-term, the return of cash is definitely a positive, but not a big thing in the grand scheme of things.

"We don't think Apple paying a dividend is going to materially change the stock in the long run. Apple will continue to be driven by product innovation and sales," he said, in an interview. "They have little in recurring revenue, so new sales is critical, and that's driven by product innovation."

Apple said it would spend $10 billion on a share repurchase program and initiate a quarterly dividend of $2.65 per share. The Cupertino, Calif.-based company said it expects to spend $45 billion on the dividend and repurchase program over the next three years.

For long-term investors, Manor Growth's Morris believes Apple is still attractively valued, and the $45 billion figure "builds in the fact Apple could raise the dividend over the next few years and still keep within the $45 billion figure."

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