With Apple’s 4-for-1 split, what happens to the quarterly dividend?

Apple’s Board of Directors has approved a 4-for-1 stock split to make the stock more accessible to a broader base of investors. Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020.

Apple's 4-for-1 stock split

Bill Maurer for Seeking Alpha:

The current quarterly dividend of 82 cents per share does not divide out evenly. This is the opposite of what happened back in 2014, when Apple’s $3.29 dividend transitioned to $0.47 after the seven for one stock split that year. When it comes down to the dividend, there are three possibilities, in my opinion…

• The first scenario is that Apple just keeps the dividend at the current rate, leaving it at 20.5 cents per share after the split. While a fractional cent dividend is not the most logical thing in the market, there are plenty of companies out there that do pay dividends like this. Here, Apple would wait until the fiscal Q2 earnings report next April or May to announce any dividend changes, in line with the usual capital return update timeline.

• A large dividend increase (in this case to 25 cents per quarter). With Apple shares soaring in recent months, the annual yield for new investors has certainly dropped, so an increased payout would certainly be welcomed. Unfortunately, I don’t see this happening…

• Perhaps a nice compromise would be to just bump up the dividend slightly to $0.21 per share after the split.

MacDailyNews Take: What do you see happening (or not) with Apple’s quarterly dividend post 4-for-1 split? We think it’s much more likely to stay at $0.205 or slightly rounded up to $0.21 that anything larger before the usual annual dividend adjustment next spring.

21 Comments

      1. That doesn’t sound right. Just looked at my note I got and it says this, this makes more sense to me. If you own shares of AAPL on or before Aug. 24, on Aug. 31 you will receive four shares for every one you hold, and the stock price will be reduced to one-fourth of its value. For example, if you hold 100 shares of AAPL trading at $400 per share, after the split you will own 400 shares valued at $100 per share.

        1. You just said exactly the same thing as melgross. 1 x 4 = 4. That means you have one, multiply it by 4 and now you have four. 4 – 1 = 3 so it is an increase of 3.

  1. Apple has been cheap with dividend increases the past two years with about a 5% increase instead of the 10-11% we saw most of the time previously. Since dividends are a small fraction of what they spend on buybacks, I’ve become very annoyed at that.

    One theory about buybacks and dividends is that with fewer shares outstanding, dividends can go up more, because there are fewer payouts. But the percentage change is small, particularly when compared to the massive amount that’s spent on those buybacks.

    As someone with a fair amount of shares, I’d rather see that spending tilted a bit more towards dividends.

    1. I certainly would prefer higher dividends as I can’t really grasp the stock buybacks despite they’re supposed to be good for shareholders. I can easily understand the dividends because I can actually count the amount of dividends in dollars I get every quarter. The stock buybacks just seem to disappear into thin air unless I’m looking at the outstanding share count.

      However, Apple seems to know what it’s doing when it comes to finances. They must be able to do that considering the company is worth nearly $2T. Not too many companies ever get to that level market cap. Although Apple continues to accumulate cheap long-term debt, they still have a fairly large pile of cash reserves. I have to trust them in terms of long-term thinking and eventually higher dividends may come, or at least that’s my hope. I’m sure they did the stock buybacks to decrease share count in order to do the 4 for 1 split which is something I didn’t anticipate. I’ll just have to trust Apple. They’ve done very well so far.

      Just remember, with the FAANGs, Amazon, Google, Facebook and Netflix don’t give dividends. Apple does. That has to mean something worthwhile.

      1. Apple has been way more profitable over the last 10 years. And if Apple does well over next 5 years (with Apple Silicon they will).

        Being in on a split or just after with a company that has a future is where the big dollars/profit are for the retail investor if they are long…:)

      2. There’s never been any evidence that buybacks cause a sustained increase in share price. Notice the word sustained. I does increase slightly upon announcement, but then drifts back down. All the increase in Apple’s. Share price can be attributed to increased sales and profits, with investors thinking that the future looks bright.

        When Apple had 5 billion shares outstanding, and they bought 1% back, in theory, that should result in a 1% increase in share price, because of the now increased eps (earnings per share). But if those shares cost Apple, let’s say $200 per share, then that 1% would be $10 billion in buyback cost. That’s an awful lot of money down the drain to increase the share price by a fleeting 1%.

        That cheap long term debt still costs money. Instead of having that money in the bank, so to speak, making a small amount of interest, they have debt with higher interest. That’s really a double whammy. They’re losing the small interest, and paying out more. Feh!

        And then they have way less cash if they want to make a big investment. This doesn’t benefit the company itself, just some group of investors. Apple has thrown some $240 billion into a black hole since they began buying shares back, and accumulated some $130 billion in debt in order to do it.

        You don’t think that they could have spend just a little less on buybacks and distributed that as dividends? Why just 5% each of the past two years? That makes no real sense.

  2. Why are they splitting? They were just buying back shares not long ago! Now they’ll have even more shares to have to buy back next time they go to buy back shares. Besides, with all of the places that offer fractionalized purchases, who cares about the price of one share?

    1. Well, the number of share they buy back doesn’t matter in the context of a split, it’s the total cost. But back 4 shares instead of one, at 25% the price per share, and the cost is the same. So that doesn’t matter.

      Many investment vehicles don’t allow for fractional purchases. And a lot of people don’t understand that they can do that even if it is allowed.

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