“Apple announced a massive increase to its capital program, but the majority of capital returns will be conducted through share repurchases,” Bob Ciura writes for Seeking Alpha. “Investors hoping that Apple would significantly increase its dividend, which seemed entirely appropriate given its fantastic earnings growth and mountain of cash on the balance sheet, should be disappointed.”
“For income investors, Apple’s dividend policy is a disappointment,” Ciura writes. “Growth investors obviously should love Apple’s capital return policy. The company is rapidly growing revenue and profits and is leveraging its balance sheet to buy back a ton of its stock. These initiatives should all help boost Apple’s stock price. However, investors interested in Apple for its dividend will not be as thrilled with Apple right now. Apple stock, even including the dividend increase, yields just 1.5%. This is significantly below the S&P 500 average yield of around 2%.”
“Investors who have held Apple stock for any length of time are likely sitting on significant gains since Apple is up 115% in the past two years,” Ciura writes. “For those who want income, it might not be a terrible idea to take some profits off the table and reinvest the proceeds in a stock that offers a more compelling dividend yield.”
Read more in the full article here.
MacDailyNews Take: Apple is obviously focused on buybacks. Dividends are just a nice little perk for growth investors.
Related article:
Apple expands capital return program to $200 billion – April 27, 2015
If they give me money for having shares I make money. If the value of my shares go up, because they are buying back shares, I make money.
With dividends, you’re taxed immediately. With buybacks, you’re not taxed until you sell the stock. For me I’d prefer buybacks.
Bob Ciura is a f*cking idiot. It’s all ROI (Return on Investment). The choice isn’t whether you should buy an equity paying a 2.5% dividend, or a put your money into a Money Market Account getting less than 1%. It’s about the totality of how much your money is making.
Most Companies (nearly all) that pay dividends do so because appreciation in their respective equities is nearly flat (less than 10% per annum). This is because their markets are mature (stopped growing beyond GDP rate), penetration is near 100%, and prospects of entering a new market (geographic and/or category) are non-existent.
Beyond the comparison of Apple to anything other than highly regarded startups, Apple’s dividend is growing faster than the economy, faster than the rate of inflation, and more importantly, is sustainable.
Apple, even though the world’s largest (by market capitalization) firm in the world, continues to grow like a startup. There is far more to be said for an equity that is growing at a compound 37+% per annum rate for the last ELEVEN years, than there is for a paltry 2.5% Dividend.
With AAPL you get both, making current annual yields in excess of 40%.
This headline could just as well have read…
Apple’s modest dividend increase is good news for growth investors
Agreed. This is a manufactured, trumped up issue. The $0.05 increase in the dividend represents a significant percentage increase. Apple is still in its growth phase, despite its massive size, and investors need to appreciate the company for what it is.
The dividend yield is a bit low in comparison to the S&P 500 average because the stock price has appreciated around 61% over the past twelve months. I will take a 1.5% dividend and a 61% stock price appreciation any day of the week over a slightly larger dividend.
Besides, the classification of investors as “income investors” has become far less relevant in the past couple of decades. Unlike the old days, it is easy and inexpensive to sell some shares – just a few shares, or hundreds, as you choose. Periodically sell 50 or 100 shares of AAPL and put that money in a readily accessible account – there is your income. Meanwhile, the rest of your AAPL investment is busy making up for the piece that you just sold.
Where else are you getting a 10% raise this year? Heck, I’m happy with it.
And where else are you getting a good dividend on a stock that is appreciating at a phenomenal rate for an ultra-safe company? Certainly not in Microsoft, which hasn’t had its stock increase in what, 15 years?
I’m more than happy with the increase. The last thing I want to see is for Apple to deplete their cash reserves to appease analysts.
Boo Hoo….crybaby… “Apple isn’t giving me enough of their money, I’m going to go play somewhere else”.
As for me…I’m crying all the way to the bank.
Good job Apple.
Exactly. This is nothing but leaches bitching that they can’t get Apple’s billions overnight, sell off the company and throw another all week coke party and then tear apart the next company they set their claws into.
As a shareholder, it’s not “their” money.. it’s your money.
(I’m not saying I agree with the article.)
I’ll take whatever dividends they feel like paying. Not that I’m an AAPL apologist, but I’ve held some amount of stock for years and they were paying 0%. Remember those days?
HEAR, HEAR !
same here, bought lots in 11/2004
no complaints! even during the “dry years” of dividend limbo i was rewarded with bursts of heady rewards, and not giving up now. Eventually the buybacks will rebound in our favour
I’ve held my Apple stock since 2004 and certainly remember those days of zero dividends and never actually expected to get any. The dividends I get from Apple easily covers all monthly utility bills for my house and cable TV and internet. I live on a fixed income and am very happy with the Apple dividends. I’m not sure who these greedy investors are but I know they will never be satisfied because greed can’t be satisfied. I know Apple can’t touch the overseas cash so I’m not expecting it. I feel Apple is being run very well and don’t have any complaints. It’s Wall Street I have issues with.
Wall Street isn’t getting any dividends from Google or Amazon or Netflix but they still like those companies and personally, I don’t see what makes them so much better than Apple.
If you listened to the CC yesterday Luca repeatedly stated that they wanted to buy back shares at these prices since he feels Apple is EXTREMELY well positioned going forward. Buying back shares at these prices with a 12 p/e is a great value.
Yes, I wish they would raise the dividend more too, but either way I am a long term shareholder and Apple is going MUCH Higher……!$
IF Congress ever gets their act together and off-shore funds repatriation becomes financially feasible then Apple will have even bigger options regarding shareholder options for distribution/utilization of cash………………….!
Oh my, someone bought a few shares of AAPL and they expect Apple to provide them a living for the rest of their lives? What would happen if they sold a few shares every week and lived off that? You can’t have your cake and expect it to feed you too.
They announced an 11% increase in the dividend. I wish I could get “paltry” raises every year.
10 years ago Apple was making a lot of money and none of it was coming back to the shareholders unless you sold what was a very impressive growth stock . This was understandable given the near death experience in the 90’s
Apple will continue to grow and that is why the capital investment program is enlarging . I wouldn’t call this a paltry dividend but then again I don’t live quarter to quarter
Show me another S&P 500 stock that is returning 2% dividends and growing at 40-50% a year – I’ll take growth + dividend any day.
How bright are you? No really? It’s more like getting your 11% raise and then being fired.
Once you sell your stock, what good does it do you?
No, a better solution is no matter what company, Apple included, will return 80 precent of the profits to it’s stockholders. If a company needs more operating cash it will take it from the cash dividend that it pays on stocks that it own. Buy backs are artificial price inflators for the stock. Put the money in stockholders hands, it’s their money.
1.5 percent so the company gets to keep 98.5%, to do what? No, no, no, if the board wants not one to tell them what to do then all they need is 51 percent of the voting shares. If the company wants more capital on hand they can do several things, own more stock, or make more money.
20% of 1 billion profit, or 20% of 100 billion or 20 of 200 billion plus the dividend paid to the shares the company owns.
Get over this idea of tax reform. Do you really think the accounting firms want tax reform, like no corporate taxes what dream world are you living in. The more complicated the more you need them the more the can claim saving you money on your taxes the more money they make. Hey the coffee is burning you may want to check on it.
There’s nothing artificial about a buyback. It reduces the number of outstanding shares, making each remaining share more valuable, as it represents a slightly bigger piece of the whole pie.
So it does return value, but at the same time it’s not taxed like a dividend. For a growing company buybacks make much more sense than dividends.
Yes it is artificial. Don’t you see a company buying back its stock could easily inflate the price, not just because those shares are off the market, but the act of buying makes it look as if the shares are in high demand. ( that is what the buy back is about )
How do I say this so I don’t offend, look, if a growth company is growing, it’s making money. The shares the company has returns value to the company just like it would to a shareholder, though dividends. So how do people see this hindering growth or not desirable?
Look if you are an employee of the company and you own stock, and the company pays a dividend, you may never need a raise. Why? Simple, your hard work is paying off and you see cash in you pocket every quarter. If you want more money for your work, buy more shares. Why would you want to wait for management to increase your pay. Of course this would drives the price of the stock up. How? You and the other employees, CEO,CFO,COO, would all be buy shares to increase their take home, not to mention to public at large wanting to make money from a company that’s making money.
No crazy pay for CEOs, they can make as much bonus as they want, by buying shares and receiving the dividends. No more stock grants, buy when you want as much as you want, sell when you want as much as you want. You are not tied to a company you don’t like waiting for your stock to vest.
Apple may lose 90,000,000,000 because of the EU, I rather have my share of dollar dividends in my pocket, from my 80% plan. Well, that’s my best interest. See, I invested to make money, not to make CEOs celebrities or for that matter multimillionaires. Some how that seems like someone else’s best interest.
How do I say this so I don’t offend? The short term demand stuff is irrelevant. The point is that each share now represents a larger portion of the company.
Look, you’re not understanding the tax differences. The dividend is a taxable event. The buyback is not. That’s very important.
You can raise cash whenever *you* want to, not when the company decides to send it to you.
I think one issue is that the buybacks can be financed by credit, but I’m not so sure about how they would work that with dividends. There really isn’t that much cash in the US.
Ciura, you suck as a journalist, maybe you should try science fiction.
oh wait, wasn’t that a dystopian present he was describing?
He can live there.
Apple is a growth company, the dividend is just there to get the company listed on the NYSE and to keep the Jobs estate from dumping shares.
Ok, I guess I’m going to offend. No way around it. Good grief, people, pay the taxes. How much time and money spent looking to pay nothing in taxes or reduce the tax liability. Many of us aren’t including the money a company hands out to a politician, for that politician to talk about businesses paying less taxes. You do understand why that will always be just talk right? Because they want you to keep giving them money. That money needs to be in the dividend, not in their hands, or in trips to visit them, etc.
What short term demand stuff? That’s accountant speak. The term involved is how long you live and want to own the stock.
The term ends when you die, or when you sell the stock. It’s all relative, and it’s all fair. Why? Because every company must 80% of it’s profits to the people who/which own the company.
I know we have been suckered into believing taxes are bad, but I would rather be paying 50% tax on a $1,000,000.00 then 30% tax on $100,000.00. People keep telling us it’s our money, why does that not apply to the money my company made. Or, are people with the shares really, really not the owners of the company?
LBOs where once a big thing. This eliminates that foolishness not by dictate but by market simplicity. Hey and there is nothing stoping a company from being private.
Hopefully, you get that accountants have no interest in having tax reform, unless it makes the tax code even harder. I truly wonder why having these companies pay no taxes or such a low tax rate is a good thing when they are only return 1.5% to their shareholders.
The reasons I say they should pay taxes is because they use a tremendous amount on government services. They are in the courts everyday. The Presidents, Secretaries of State, Secretaries of Commerce are taking up their issues with other nations, in other words, having this group of salesmen is not bad not a bad deal, Senators and Congress people are finding new ways to give businesses money. Please, they should pay taxes. Patent enforcement. Good grief, they use much more of the government then people want to give them credit for. 35%, I’m not convinced it should be that low. But if they are willing to pay the 80% of profit out to the shareholders, I could see that being reduced but no where near 0.
“We can save you billions on your taxes if you setup this…”
After paying them, the congress the folks, the senators, the locals, and the lawyers, tax lawyers, flying back and forth to DC, dinners, lunches, favors, entertainment, …, how much money did the company save?
Pay me my 80% of profits in dividends and I will handle my own tax situations. “It’s my money”
Just keep digging your own hole. You do realize that never admitting you’re wrong is not the same thing as always being right, right?
Well, do what’s in your best interest. I would ask that you think first, not just parrot what you have heard. Think.
Think about companies that own air planes so the CEOs don’t have to wait on a flight. Think how value they tell you his time is so that’s why have a plane is important. Then think about what it must cost to maintain, fly, fuel, insure, land, park that plane. Think to what kind of problems require a CEO to fly in on the company plane and then head back. Maybe there is a management problem in the chain somewhere. Think! Or just admit is a perk.
Think!