How to Play It: A dividend strategy with Apple in mind

“Apple isn’t the only prominent company that analysts have tagged as a potential source of dividend payouts. Investors can target the sweet spot of reliable income and share price gains by buying companies that are likely to initiate or increase dividends,” David K. Randall writes for Reuters. “With nearly $100 billion in cash on its balance sheet, Apple will initiate a dividend and share buyback that will total $45 billion over three years. A quarterly dividend of $2.65 per share will begin in July, marking Apple’s first such payout since 1995.”

Randall writes, “Analysts expect Apple’s large technology peers to follow the leader and boost their dividend payouts. ‘If anybody can make dividends cool, it’s Apple,’ said Christopher Davis, a fund analyst at Morningstar who covers dividend funds… A technology-focused ETF could be another way to play possible dividend increases in the sector. The $9.5 billion Technology Select SPDR, for example, is top heavy with dividend payers Apple, Microsoft, International Business Machines and AT&T accounting for 41 percent of the fund’s assets. [Non-dividend-paying] Google is the fifth-largest holding at 5.3 percent.”

“The volatility in the stock market last year made dividend strategies increasingly popular. Dividend-focused funds and ETFs collectively had $17.3 billion in inflows last year, despite a broader investor push away from equity funds, according to Morningstar data,” Randall writes. “It’s a trend that shows few signs of letting up, despite a new risk: the end of low tax rates on dividends. Dividend income tax rules are set to revert to the pre-George W. Bush era, which means dividends will be taxed at ordinary income rates of up to 39.6 percent. The tax is currently 15 percent.”

Read more in the full article here.

MacDailyNews Take: Analysts expect Apple’s large technology peers to follow the leader. As usual.

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