It used to be that Apple (NASDAQ: AAPL) did not even pay a dividend.
The thinking among management was that cash was better off going into researching and developing new products, or acquiring other companies. There was little consideration as to sharing the cash flow with shareholders in a dividend. Like so many other high tech stocks, Apple would reward shareholders with growth, not income. But now Apple is becoming more and more attractive as a dividend income stock.
Apple is still very profitable.
But there are concerns about its product line. That is easily demonstrated by the stock price being down nearly 3 percent for 2014. In addition, Apple greatly underperformed both the Dow Jones Industrial Average (NYSE: DIA) and the Standard & Poor’s 500 Index (NYSE: SPY) in 2013. New products did little positive for the stock price. Not even its deal with China Mobile (NYSE: CHL) could generate a bounce for the stock. Intervention by Carl Icahn did little to lift the share price, either.
Particularly troubling is that earnings-per-share growth is down more than ten percent this year.
But the dividend for Apple is growing. At present, the average dividend for a member of the Standard & Poor’s 500 Index is just under 2 percent. Apple has a dividend of about 2.25 percent. It has the profits and cash flow to increase the dividend. The stock buybacks it has will also make it easier to raise the dividend as there are less shares of stock on the market. Apple’s stock buybacks increase the earnings per share, which makes it easier to increase the dividend payments for each shareholder.
It was not that long ago, the Fall of 2012, that Apple was being touted as a $1000 a share stock by some analysts. It is now around $545.