“Apple (AAPL) has been hot in the news lately, and for good reason. The company reported record March quarter revenue and 15% EPS growth,” Dividend Appreciator writes for Seeking Alpha. “The company is now also much more geographically diversified when it comes to revenue as fully 66% of revenue is generated abroad. It also announced several shareholder-friendly measures like a dividend-hike of 8% and an increase in the share repurchase program.”
“A year ago Apple announced a share repurchase program of $60 billion, one of the largest share repurchase programs ever announced by any company. Apparently the board thought it could do better and so on April 23 the company expanded the program to $90 billion,” D.A. writes. “Based on a current market capitalization of approximately $510 billion, that means the company will retire fully 17.6% of its shares under the current program. That is simply massive, even if you compare it to seasoned share repurchase companies in such high cash flow businesses as tobacco.”
“Since reinstating its dividend at $2.65 in the summer of 2012, the company has increased the quarterly dividend twice. The last increase to $3.29 was announced on April 23. On an annualized basis that translates into a yield of 2.2% based on the closing price on April 30,” D.A. writes. “The annual dividend payment of $13.16 per share is covered by an earnings per share for fiscal year 2013 of $39.75. That’s a payout ratio of 33% which means the dividend should be very secure. Even without much earnings growth, the company has room to increase its dividend for years on end. Over the next five years the analyst community expects Apple to grow EPS by 15%. If we assume that the valuation remains the same and add in the dividend, total expected annual shareholder return comes in at a solid 17.1%. That is far above the stock market’s historical return of approximately 10%.”
Read more in the full article here.
Dividends reinvestment is an attractive way for me to add to my aapl investment. Whilst the stock repurchasing plan will add value to the stock, dividends are a direct way of return money to the investor. Granted it can have additional tax liabilities but that will mainly affect the short term investor who will have to pay capital gains.
Perfect stock for your Roth IRA.
Exactly where a portion of mine is. More stashed in a regular IRA and some in a standard brokerage account where I have access to it to help fund a comfortable retirement.
You neglected to differentiate between short term and long term capital gains. Long term investors also have to pay capital gains taxes (when they sell), but at the more favorable 15% rate (for the most part). Short term investors (meaning they sell within a year of the original purchase) have to pay short term capital gains taxes, which are basically at regular income tax rates. To just say “have to pay capital gains” is an incomplete picture.
Correct, capital gains will have to be paid at some point no matter how long you hold the stock for.
Also for short term investors the tax burden will be at their highest tax rate. So the disparity can be large.
The dividends made the past two+ years easy for Apple investors to handle and absorb the fabricated AAPL share crash.
Absolutely! One was able to reinvest those dividends at a reduced rate.