Is Apple Inc. (AAPL) Doomed?

Apple Inc. (NASDAQ:AAPL)’s investors took yet another blow on April 17, in what has proven to be a horrible year.

A report from DigiTimes, a Taiwanese paper known for insight into technology supply chain issues, said that iPad Mini shipments will fall 20% to 30% from the previous quarter. In addition, a supplier of chips used in the iPhone took a large inventory charge, inciting fears that Apple Inc. (NASDAQ:AAPL)’s earnings next week will disappoint already dour expectations.

The news slammed Apple Inc. (NASDAQ:AAPL) stock in particular and technology stocks in general. Apple fell more than 5% on the day, and fellow technology large-cap Cisco Systems, Inc. (NASDAQ:CSCO) fell 2.5%.

Pessimism abounds

Apple Inc.Apple Inc. (NASDAQ:AAPL) has dropped 42% since its high set last September. Much of this decline has come from the pervasive fear that the iPhone, Apple’s bread-and-butter device, is losing momentum. Market share gains from lower-priced competitors, as well as a sluggish holiday quarter, have fueled the bearish fire.

Indeed, Apple’s last quarter was rough. The company reported first-quarter earnings per share that were roughly flat from the year-ago period.  And the situation going forward isn’t any better; earnings are expected to decline this year.

Before investors rush for the exits, it’s important to understand the bullish case for what was once the world’s most valuable public company.

1. Mountains of cash

The market’s pessimism defies the fact that many large-cap tech stocks hold billions in cash on the balance sheet, and carry little to no debt. At the end of 2012, Intel Corporation (NASDAQ:INTC) had more than $12 billion in cash, equivalents, and short-term investments on its books. Cisco Systems, Inc. (NASDAQ:CSCO) has more than $46 billion in cash and investments on its balance sheet.

Apple Inc. (NASDAQ:AAPL) outdoes them all, with $137 billion in cash and marketable securities. That amounts to $146 per share, which is almost 40% of the company’s market capitalization. And since Apple generates huge free cash flow, Moody’s estimates Apple’s cash hoard could rise to $170 billion this year.

2. The dividend

Now that many technology companies generate so much profit, with so little debt to service, tech firms have instituted programs designed to return some of that excess cash to shareholders in the form of high dividend yields.

Almost one year ago exactly, Apple instituted its new dividend program. The company set its annualized payout at $10.65 per share, which, due to the company’s collapsing stock price, presents new investors with a 2.6% yield.

Apple isn’t the only technology company embarking on a new path of hefty dividend payouts. Although Cisco is a relatively new dividend-paying stock, having only recently instituted its dividend program in 2011, the company has almost tripled its shareholder payout since then. Recently, Cisco provided investors with a 21% dividend increase. In addition, Intel Corporation (NASDAQ:INTC)’s dividend is almost double what it was five years ago and currently yields more than 4%.

3. Compared to the market and even the technology sector, Apple is cheap

It’s obvious that Mr. Market dislikes technology stocks right now. Many tech stocks can’t earn a price-to-earnings multiple on par with the broader market. The current trailing-12-month P/E ratio on the S&P 500 Index stands around 18.

However, tech giants including Intel and Cisco trade for approximately 10 and 11 times trailing earnings, respectively. Apple, meanwhile, now exchanges hands for just 9 times its trailing-12-month earnings per share.