Apple – A Dividend Grower?

Another earnings report. Another home run. Apple Inc (AAPL) reported after yesterday’s market close, a Q2 EPS of $11.62 beating analyst expectations of $10.18 by $1.44. Revenues for the quarter came in at $45.6B. As the world’s largest publicly traded company, currently with a market cap of $470B, that is quite an achievement.As a quick reference, the following chart shows the great story of Apple’s trend in revenue, earnings and book value per share. On a 10-year scale, Apple boasts a revenue growth of 38%, EBITDA growth of 63.6% and book value growth of 43.5% annualized.

But as a dividend growth investor, I am more interested in the announcement of the stock split, dividend raise and the buyback plan.

Stock Split
Apple has confirmed that the stock will be split 7:1 that is targeted to be completed Jun 9, 2014; which at current levels will drop the stock price around the $75-$80. This is good news for the small investors considering to add Apple to their holdings.
Buyback
Apple is currently sitting on a cash pile of $151B of which $132B is kept overseas to lower its US tax bill. The company has decided to increase its buyback by an additional $30B through next year bringing the total to $90B. Carl Icahn should finally be able to calm down and get some sleep 🙂 It is important to note that the overseas cash cannot be used in buybacks and dividends unless Apple decides to pay the additional US tax on the amount.
Dividends
Apple started paying dividends in 2012 and much has been written by others about how this was the turn of Apple from a growth-focused stock to a value stock. This seemed to disappoint for a majority of the day-traders and investors who are in the market for a quick buck, but that news was really music to my ears. With the initiation of dividends, Apple signaled that investors can profit while staying invested without selling the position to exit the investment before realizing any profit.
The growth in dividends seem to be at a very good pace as well. From 2012 to 2013, the dividend rose 15% and yesterday’s announcement of new dividend of $3.29 signals an 8% increase. All signals seem to point that Apple may continue to be a dividend grower for years to come.
Disclosure: None. My full list of holdings can be found here.

8 thoughts on “Apple – A Dividend Grower?

  1. R2R,
    I’m very happy with the earnings. Big companies get a lot of scrutiny and Apple more than most. So much effort goes into criticizing their lack of recent innovation, they forget how much money they actually make. The split was a surprise, but I read somewhere this was there play to get into the Dow. My 16 shares will become 112. I’m also happy with the dividend and buyback. Nice to see the bears scrambling after this one.
    -RBD

    • Congrats on the stock split and the increased dividend income, RBD. Now that the price per share will drop, I will also be considering adding to my portfolio. I hadnt heard the hypothesis that the recent move was a play to get into Dow. Thats interesting..thanks for the info.

      regards
      R2R

  2. One of the problems I have with Apple is that their income doesn’t come from a lot of sources. Their product range is not overly diversified, a disruptive technolgy from one of their competitors in the smartphone market for instance, will have enormous effects on Apple’s profitabillity. As such I am not to eager to take a position.

    Best,

    DW

    • Thanks for stopping by Dividend & Whisky – always good to hear from new readers and discovering new sites.

      The phone market makes up almost half of their earnings and I think Apple realize that. That is why they’ve been looking into other products such as wearables, in-car entertainment, tv and living room products. Companies like Google and Samsung have really tried to take them down over the years, but Apple’s design has still kept ahead – but are probably running out of time. Like any tech company, the status quo will not do – even making slow progress will appear as going backward.

      regards
      R2R

  3. R2R,

    I should have bought some shares a year ago when I initiated a position in Microsoft. Oh well…I will be patiently waiting for a dip to $500 (or whatever the split adjusted price is). I like the cash balance and the commitment to dividends and buybacks.

    • Same here, MDP.
      The board has given strong indication that the dividends will continue to grow in the coming years – so, I will looking to initiate a position as well. This is great for dividend growers as there arent a lot of tech companies in the category.

      Thanks for stopping by. Happy investing
      R2R

  4. I think the news about regular dividend increases was probably the best that was released. When I started my position I was hoping the stock would become a dividend growth stock with its huge cash buildup, glad management finally came out and said it.

    Nice analysis R2R as always.
    Best wishes,
    SFZ

    • Good for you that you called it early and have a position in it. Today was a nice jump in the stock price. It’ll be interesting to see what they will do with the cash overseas – as they dont want to bring it in and pay the US tax bill. My guess is that they probably will just invest it overseas.

      Thanks for stopping by.
      R2R

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