Why couldn’t Apple double its dividend?

“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.”

Read more in the full article here.


    1. First, there is no money to return. You need to realize that 99.999% of AAPL stockholders did not give *any* money to Apple for the stock they hold. Therefore there is absolutely zero money to “return” to the shareholders?

      Further you do realize that if you own APPL stock that is what you own? You don’t own any part of Apple? You can’t walk in with 1,000,000 AAPL shares in hand and demand to see the brick that you “own”?

      I wish people who own AAPL or advise others on buying/selling of AAPL would get these things right!

      1. “there is no money to return”

        Well, sort of. All the stock that is publicly traded came about because Apple sold it and got the money. They do that now when they give stock options to employees.

        I agree with your sentiment that it is not like Apple is holding on to the cash for the shareholders.

        It is true I can’t walk in with a small number of shares and demand something from Apple. There are rules about the rights of shareholders.

        If I owned all of the shares (woot!) then I could walk in and claim ownership.

        Generally, some of the profits are paid to the shareholders and some are kept for reinvestment in the company.

        Apple has a huge cash stream which could support a higher dividend than they are paying now. I would be shocked if they doubled it at the next shareholder’s meeting, but a 10 or 20% bump would not be out of line. In the recent past Tim Cook said that we should expect increasing dividends.

        Companies that steadily raise dividends usually get rewarded with higher stock prices. This is an advantage because the company can then issue new stock (at this higher price) to use for bonuses for employees or for takeovers. For example, instead of repatriating $20B to finance the takeover of some company Apple could issue $20B in new stock and use that to purchase a company.

    2. While you may “own” the profits that are surplus above the cost of the business including debt, you don’t therefore have a right to have that profit given to you in cash. The business can just as easily re-invest all of its profit into R&D or acquisition and increase the future earnings of the company.

      Not one single dime of the money that Apple “returns” to investors improves its future earnings potential. Given the massive scale that Apple works in, it’s a pity that they wasted one single dime on the useless “return money to investors” Ponzi Scheme.

  1. That would be really sweet. As it is, Apple’s dividend pays for all my monthly home expenses including cable service. As far as I’m concerned, Apple could stop the buybacks and double the dividend but that doesn’t seem likely. If doing that wouldn’t increase institutional ownership, then I don’t know what will. However, knowing Wall Street, they’ll continue to buy Amazon, Netflix and Google at premium prices because they think those companies have a better future than Apple. I honestly have to scratch my head on that reasoning.

  2. A lot of Apple’s strategy hinges on taxation of repatriation of foreign holdings. Their decision whether to reinvest, acquire, buy back shares, or issue dividends considers the tax implications. I don’t see analysts talking about that much (except at obvious times like when they acquire a foreign corporation, which I’ve heard Beats was when Apple acquired them).

  3. First the dividend will be raised and slowly as not all the money Apple has is in the U.S. so Apple really cannot afford to pay out much more than another 10-15 cents without getting into some kind of tax issue with their overseas monies …..

    Apple and many other Companies are trying to get some favorable tax rates for bringing money back into the U.S. but we know how Quickly Congress acts, not …..

    So without the ability to bring more monies back into the U.S., Apple does not have the cash to raise the dividend too high ….. BUT …..

    With the monster growth Apple is experiencing the U.S. monies are growing quickly so expect a nice hike in the dividend ….. I’m thinking a nice 10-12 cent hike!

  4. I would much rather Apple focus on increasing dividends instead of buying back its stock. Wall Street doesn’t care about Apple’s P/E ratio, which is the only thing that buybacks have any effect on. Microsoft, Netflix, Amazon, Google, Facebook all have much higher P/E ratios than Apple. Continued buybacks that only serve to lower the P/E aren’t going change the fact that Wall Street just doesn’t give a fuck how discounted AAPL shares are based on their P/E.

    I swear to god Apple’s P/E could be 1 or 2 and Wall Street would still treat the stock like the company might go out of business next quarter. “Elijah Smithkleinberg at Financial Capital Partners has rated AAPL a SELL based on rumors of slowing iPad sales in India!”

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