Should You Buy Apple for its Dividend...
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Jonathan Yates
Should You Buy Apple for its Dividend?

Old school tech stocks did not pay dividends.

It was the policy of management that cash was better spent on acquisitions, or research or development efforts.  Dividends were considered the province of utilities, consumer stocks, etc…  For the tech world, double digit growth rates more than rewarded those lucky enough to own the shares.

The times are a changing!

All the major tech stocks such as Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC), and Apple (NASDAQ: AAPL) all pay healthy dividends.  There are many now owning shares of Apple who are probably there for the dividend yield.  It is certainly not the price as Apple is down 24.65% for 2013.  It does appear headed in only one direction, too, as it is trading well below its 20-day, 50-day, and 200-moving averages.

As the chart below shows, the candlestick patterns for Apple have been in a bearish pattern, too:

What is now above average for Apple is its dividend.  While the average dividend yield for a stock on the Standard & Poor’s 500 Index is around 2%, for Apple it is 2.66%.  In addition, the dividend payout ratio for Apple is better than the average for other stocks.  The dividend payout ratio for Apple is just 11.98%, which is very low.  That means there is plenty of cash for dividend hikes and share buybacks.

There have been three recent analyst upgrades for Apple.  But they have all been from boutique firms.  It was not that long ago that a similar boutique firm projected a target price of $1000 a share for Apple.  Earlier this month, Apple fell to under $400 a share.  Now trading around $405 a share, the mean analyst target price for Apple over the next year of market action is $601.60.  A dividend increase is the better bet.

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