Apple Inc. (NASDAQ: AAPL) has been one of our dividend offenders for quite some time, but it is hard to argue that the company’s equity-investor strategy has been wrong.  After all, its stock has weathered the storm well and recent years have been incredibly good for the company.  A new call is out from Morgan Stanley, and it has some controversy to it with a good scenario and a bad one.

The firm is expecting that Apple is now closer to returning capital to shareholders.  The call is for a dividend, but there is also the possibility of a large stock buyback as a means of using some of that $76 billion cash arsenal. This is likely to be close to $100 billion in early 2012.

Morgan Stanley noted a 2.4% dividend rate but it also noted the possibility of a $25 billion share buyback program as a possibility.  The report also leaves open the possibility of a large acquisition, but Apple has traditionally been an organic grower.

The take of 24/7 Wall St. is that if Apple wants to handle everything smoothly then it needs to announce a one-time dividend followed by a healthy continued dividend of about 2.5% or even more.  This notion of a stock buyback program is a silly one.  Why does Apple need to shrink its float?  Does Apple need to buy down its P/E ratio?  The stock trades at less than 14-times this year’s expected earnings and under 12-times next year’s expected earnings… Does Apple need to manipulate its earnings multiple to under 10?

One-time dividends, steady dividends, and share buybacks have all had mixed results when it comes to technology stocks.  Microsoft Corporation (NASDAQ: MSFT) has learned that dividends do not assure ongoing shareholder success after a long period of growth.  Cisco Systems Corporation (NASDAQ: CSCO) has already bought back more stock in the last decade than most companies in the S&P 500 have as their full market capitalizations now.  That hasn’t helped it, nor has its unimpressive dividend yield.

Apple needs to return capital to shareholders or it needs to make a large deal with its cash.  This notion of a buyback would be a serious waste of capital.  There is just no point to a buyback, and many investors and pundits (including yours truly) think they are a waste of capital and effort except in extreme circumstances.

JON C. OGG