“It’s been about 2 ½ years since Apple joined the dividend paying universe. Since then, it’s slowly lifted the quarterly dividend to its current level of $0.47 per share, which corresponds to a yield of about 1.7% at current prices,” Dave Dierking writes for Seeking Alpha. “That puts it a little shy of the S&P 500’s current yield of 1.9% and I think Apple can do much better.”
“Management was right to focus on buying back its own shares given how inexpensive they were priced in the open market. With Apple’s stock price having risen around 40% in 2014, valuations are now approaching levels that are more comparable with the broader market,” Dierking writes. ” With shares no longer being severely discounted it might be the right time to begin raising the dividend too.”
“The idea of doubling the current dividend seems reasonable because it’s an achievable benchmark to hit yet doesn’t put the company in a position of overextending itself from a liquidity standpoint. Apple’s total annual dividend was around $11B in 2014, so in order to double the company would need to come up with an additional $11B,” Dierking writes. “Given recent trends in net income and, perhaps more importantly, free cash flow, it’s easier to see how a higher dividend can be easily supported.”
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