Apple Dividend Stock Analysis
Apple dividend growth has been attractive in recent years. And, Apple stock continues to set all-time highs.
So, let’s take a close look at all of the Apple dividend metrics and its stock valuation too. I will do this by walking through an Apple dividend stock analysis.
Disclosure: This post contains referral links.
Some questions I want to answer…
Is Apple a dividend stock? And if so, is Apple a good dividend stock?
What about Apple dividend growth and safety? Is it time to buy Apple stock? Or, is the stock price too high?
These are just a few questions I want to address. And I will do so with the aid of my Simply Investing report.
I subscribe to Simply Investing. And you may like to read my review: The tools Simply Investing provides a dividend investor.
But before we dig into Apple’s details, I want to point out a few highlights for you…
Apple Stock Review: Key Takeaways
1. Having paid an increasing quarterly cash dividend since 2012, yes, Apple is a dividend stock.
2. However, because of the rapid rise in Apple’s stock price, its dividend yield is low. Less than 1%.
3. The combination of regular, rising dividends and large increases in the stock price has made Apple an excellent investment for total return.
4. But, the rapid rise in the stock comes at a price. The shares appear to be overvalued.
5. Finally, Apple stock represents a solid long-term stock to hold in my dividend portfolio.
Ready to buy or sell Apple? Or any stock for that matter? I use the Webull app to trade stocks for free. Its stock information and trading capabilities are very powerful
There’s much more. So let’s dive in. We will start with a brief review of the company’s operations
Apple: Company Background
Headquartered in Cupertino, California, Apple designs, makes, and markets mobile communication devices, media devices, and personal computers.
In addition, they sell a variety of products related to software, services, accessories, networking solutions, and third-party digital content and applications.
The company’s hardware products include the:
- iPhone smartphone
- iPad tablet computer
- Mac personal computer
- Apple Watch
- Apple TV
Apple’s software includes:
- macOS, iOS, watchOS, and tvOS operating systems
- Apple Pay
Digital content and services are composed of the:
- Apple Music
- iTunes Store
- App Store
- Mac App Store
- TV App Store
- iBooks Store
Now, a few words about Apple stock. Then we will move onto the Apple dividend.
Apple Stock Split History
Apple stock has split 5 times during its history as a public company. The most recent Apple stock split was on a 4 for 1 basis. This was done in August 2020.
Stock splits have little economic consequence. They merely function to bring the stock price down to a lower level.
At the same time increasing the number of shares outstanding. Therefore, market capitalization, reflecting the companies value, remains the same.
What about a shareholder at the time of the split? Once again, nothing happens that has an economic consequence.
Using my Apple shares held in August as an example…
After the stock split, I had 4 times as many shares. With a per-share value of 25% of the pre-split stock price. And now receive dividends worth 25% of the old Apple dividend rate per share.
To emphasize, as a current shareholder. A stock split has little to no meaning.
Apple Stock Symbol
Finally, Apple stock trades on the Nasdaq stock exchange. It trades under the ticker symbol AAPL (NASDAQ: AAPL).
Next up. Let’s review all the knowledge needed about dividends on Apple stock.
Does Apple Pay A Dividend?
Yes. Apple pays a dividend.
There are 2 rules here at Dividends Diversify. First of all, we only review stocks that pay dividends. Furthermore, I personally invest in every stock that we review.
Only investing in dividend stock is one of my money management philosophies. Other money rules I live by are to manage my money proactively, online, and for free. To do this, I use Personal Capital.
Next, let’s work through dividend metrics. Then we will know exactly how Apple’s dividend works.
How Much Dividend Does Apple Pay?
The current Apple dividend payout is 82 cents per share on an annual forward basis.
The forward Apple dividend per share is the most recent quarterly dividend paid. Multiplied by the 4 calendar quarters the company pays dividends each year.
Apple Dividend Yield
The Apple dividend rate per share gives us a .7% Apple stock dividend yield. Based on the recent Apple stock price.
A stock’s dividend yield is the annual dividend rate. Divided by the stock’s price.
When a stock’s dividend yield is so low. It makes me question whether there are better dividend stocks for passive income to invest in.
Why Is The Apple Dividend So Low?
There are 2 things that change a stock’s dividend yield. First of all, a change in the annual dividend rate per share. That is authorized by the company’s board of directors. Or, a change in the stock price.
Furthermore, changes to a stock’s annual dividend rate are infrequent. So, most changes to the dividend yield are due to fluctuations in a stock’s price.
Finally, a stock’s dividend yield moves in the opposite direction of the stock price.
Apple’s stock price has increased rapidly. The result? Apple’s dividend percentage has been falling.
I prefer to purchase stocks with higher dividend yields. The best dividend stocks for me have yields between 3%-5%. But, I do make exceptions to this rule. Especially for such a high-quality company like Apple.
And, according to the Simply Investing Report, Apple’s dividend percentage is less than its long-term average. This is a sign that Apple stock may be overvalued.
We will get to Apple stock valuation in a moment. But right now, let’s continue our Apple stock analysis. And review a few other facts about the Apple dividend.
How Often Does Apple Pay Dividends?
Apple’s dividend frequency is every 3 months or 4 times per year. Each quarterly dividend payment is 20.5 cents per share.
What Is The Apple Dividend Schedule?
Here are some of Apple’s key dividend dates. That you want to be aware of.
First of all, Apple pays dividends in the following months: February, May, August, and November.
Furthermore, during these months, the Apple dividend is paid on or around the 15th day.
Finally, the dividend is always paid on a Thursday.
So, the actual payment date can range between the 12th day and 18th day. During the months Apple pays dividends.
Since Apple’s dividend payable date can vary. It is a good practice to check its investor relations website.
Or, their latest dividend announcement press release. These sources will provide the exact date for each quarterly dividend.
When Is The Apple Ex-Dividend Date?
As a potential new shareholder or one looking to make an add on buy, you may want to receive the next Apple dividend payment. To do so, you must complete your investment before the ex-dividend date.
Apple’s ex-dividend date falls on Friday prior to when its dividend is paid.
Once again, refer to Apple’s website for the precise date. Or its quarterly press release announcing the next dividend.
On the other hand, by being a long-term buy and hold investor in Apple stock. Then you will be sure to receive every dividend the company pays.
So, let’s talk about the dividend history of Apple next…
When Did Apple Start Paying Dividends?
The answer to his question is, it depends. Depends on what?
Whether you want to know the first time Apple started paying dividends. Or, the second.
I will assume we are talking about the second time. That being the case, the dividend Apple’s recent dividend history started in 2012.
Apple Will Likely Become A Dividend Achiever
Also, Apple management has increased the dividend each year since it was initiated in 2012. This represents an 8-year streak of consecutive annual Apple dividend increases.
I expect Apple to become a Dividend Achiever in the near future. Dividend Achievers are stocks with increasing dividends for 10 years in a row or more.
But there is a little more to Apple’s dividend history. Versus what has happened since 2012. Let me explain…
Apple Dividend History
Prior to 2012, the company paid a dividend to its shareholders. They did so from 1987 to 1995.
After 1995, the Apple dividend was suspended. Until it was reinstated in 2012.
Apple Dividend Growth Rate
We know that Apple’s dividend percentage is very low. When this is the case, I want a stock with fast dividend growth. Let’s say 8% each year or more.
Table 1: Apple Compound Annual Dividend Growth Rate
|1 Year||3 Years||5 Years||7 Years|
Because organic dividend growth is important. It’s 1 of the 3 concepts in building dividend wealth.
As the table above shows, over the long run, Apple’s dividend growth has met my expectations.
But what about the last 1 or 2 Apple dividend raises?
Recent Apple Dividend Increase
First of all, I thought the 2019 Apple dividend increase was on the low side. Just 5.5%.
So, I was anxious to learn about the 2020 Apple dividend increase and new payout rate. That increase was also lower than I would have preferred. It came in at 6.5%.
Apple typically announces its dividend increases in late April. Or early May.
This company’s business fundamentals and cash flow are strong. So, I think investors deserve a larger dividend increase than what has been offered up the last 2 years.
Can dividend policy give us any clues? About the future of Apple’s dividend? Let’s see…
Apple Dividend Policy
To the best of my knowledge, Apple does not communicate a formal dividend policy to the public. On the other hand, I prefer it when a company is transparent about its intentions for the dividend.
But, Apple’s approach in not a red flag. Many company’s operate this way.
I do know this. This company is very proud of the cash returned to shareholders in the form of dividends and share repurchases. They routinely update and present a schedule on their website that shows their history in this area.
But Apple does have a dividend policy. Even if they choose not to communicate it to us. And from looking at Apple’s actions, I can put together a dividend policy statement on their behalf.
These are my words. Not Apple’s….
The dividend policy of Apple is to:
1. Pay regular quarterly cash dividends.
2. Increase the quarterly dividend annually during the 2nd calendar quarter of the year.
3. Share approximately 25% of accounting earnings to reward stockholders in the form of dividend payments.
Actions speak louder than words, as the saying goes. And this is exactly how Apple has been operating. Since it reinitiated the dividend in 2012.
Apple Dividend Growth Is Supported By Revenue Gains
Apple’s revenue peaked in 2015 at $234 billion. During 2016, as revenue declined there were concerns about the future revenue-generating capacity of the company.
Chart 1: Apple 7-Year Revenue Trend
First Revenue Uncertainty
At the time, the iPhone accounted for a very large portion of the company’s revenue and profit. The smartphone market was maturing. And their competition was catching up.
In addition, customers were upgrading their phones less frequently. This was mainly due to the annual changes from phone to phone becoming less dramatic.
As sales slumped, so did the stock price. The stock made a bottom at around $20 per share in May 2016.
Then Apple Revenue Growth Resumes
Since then, revenues and the stock have taken off. The company has gone through a fundamental transformation.
They have turned a business centered on how many devices it ships. Into one built around high-end features and services for those devices.
Revenue peaked again in fiscal 2018 checking in at a little over $265 billion. After a pause in revenue growth for 2019, 2020 results reflect another all-time high.
Revenue & Product Pricing
Finally, Apple has implemented a premium pricing strategy with its newer iPhones.
High prices may protect and even enhance their profit margins. On the other hand, higher prices may come at the expense of lower unit volumes in future years.
Apple Dividend Payout Ratio Based On Earnings
Apple’s earnings have been strong. They have grown about 13% annually over the past 7 years.
Chart 2: Apple Dividends And Earnings Per Share
Based on earnings, Apple’s dividend payout ratio is running at a little less than 25%. This is certainly a very secure level from my perspective.
A lower dividend payout ratio, like Apple’s, is a positive metric. It shows the company has ample room to raise the dividend in the coming years. Or, withstand an earnings drop without having to reduce the dividend.
Apple Dividend Payout Ratio Based On Cash Flow
Apple generates plenty of free cash flow. They generated more than $73 billion in 2020 as the chart below shows. And the dividend consumed just 19% of that cash.
Chart 3: Apple Dividends And Cash Flows
Management directs most of their excess cash toward share repurchases. That’s another shareholder-friendly practice along with paying dividends.
However, I would prefer if more of that cash was directed toward dividend increases. Since the company has more than enough dividend payment capacity to do so.
So let’s discuss the future of Apple’s dividend.
With all of the dividend metrics, we have reviewed. And the business fundamentals, I’m in a position to take a shot at predicting Apple’s dividend future.
Apple Dividend Growth Forecast
Given the modest payout ratios, the Apple dividend rate has room to be increased even if earnings growth stalls out.
But, I do not expect profits to falter. Earnings may not grow as fast as they have over the past seven years. But they should grow 8-10% annually.
Then by holding the dividend payout ratio constant at 25%. Shareholders would be rewarded with a similar amount of dividend growth.
So, for my planning purposes, I am going to assume a 9% annual Apple dividend growth rate in future years.
I think this is a very sustainable level. And will bring dividend growth more in line with the past 5 and 7-year compound annual growth rate trends. Versus the last 2 Apple dividend increases that were lower.
Maybe I will be surprised with even faster dividend growth. Unlike other slower growth technology stocks that pay dividends.
Next, let’s check on Apple’s financial position. I have a feeling it will be very strong. But let’s do our due diligence.
We will look at credit ratings. And, capital structure in the form of debt to equity.
Apple Credit Rating
Apple carries an Aa1 and AA+ credit rating from Moody’s and S&P, respectively. This is a very strong credit rating of “investment grade – very low credit risk.”
It’s a good idea to check the credit ratings for the stocks you own. Just like it is a good idea to check your personal credit score.
You can check your credit score for free. Using Credit Karma.
Table 2: Credit Rating Evaluation Grid
Apple’s credit rating is only one grade below triple-A. AAA represents the highest possible credit rating awarded.
So, based on the credit rating, it is pretty clear that Apple will be able to meet both its short-term and long-term obligations as they come due.
Apple Balance Sheet
Strictly speaking, Apple carries a debt to equity ratio of 1.7 to 1. But that doesn’t tell the full story.
What I mean by that is Apple also carries a large amount of cash and short-term marketable securities on its balance sheet. If the company chose to, they could pay off most of their debt with these liquid assets.
So, taking the credit ratings and capital structure from the balance sheet into account, Apple has a very strong financial position.
And what does this strong financial position provide? Dividend safety. A few words on that topic next…
Apple Dividend Safety
The Apple dividend appears very safe from a reduction in the foreseeable future. I base this assessment on a number of areas we have reviewed so far.
- The company’s solid business fundamentals
- Apple’s dividend rate compared to earnings and cash flow (payout ratios)
- Apple’s dividend history and a low dividend yield
- High credit ratings and strong balance sheet
We have spent a lot of time on Apple’s dividend. But an Apple stock analysis would not be complete without looking at the stock’s valuation.
We will check that area next. And then wrap this up.
Apple Stock Valuation
I like to judge a stock value with several methods and sources. Then draw my own conclusions about value.
So, we will review:
- Apple dividend discount model
- Apple stock price to earnings ratio
- Morningstar fair value estimate of Apple stock
- Personal Finance investment newsletter buy target
- Simply Investing Report
Apple Dividend Discount Model
The single-stage dividend discount model considers several factors we have covered thus far.
- Current annual dividend payment – 82 cents per share
- Projected Apple dividend growth – 9%
- My desired annual return on investment – 10%
Using the dividend discount model assumptions above, the model calculates the fair value of Apple stock at $89 per share.
The Apple dividend discount model places a relatively low value on the stock. This is not surprising because of Apple’s low dividend percentage.
Morningstar Fair Value Analysis Of Apple Stock
The investment analysis firm Morningstar believes Apple stock is fairly valued at $85 per share.
Personal Finance Investment Newsletter
The long-running investment newsletter, Personal Finance, sold Apple stock in mid-2020 when it traded at $92 post-split price per share. They felt the stock was overpriced at that level.
Simply Investing Report
The Simply Investing report uses the following rules to assess the value of a stock.
- Stock price to earnings ratio must be below 25
- The current dividend yield must be higher than the average dividend yield over the past 20 years
- The stock price to book ratio should be less than 3
Stocks meeting these 3 rules are considered to be undervalued and trading at an attractive price for purchase.
Based on the Simply Investing report criteria, Apple stock is not a good buy at this time. Apple stock is considered overvalued based on these rules.
Apple Stock Price to Earnings Ratio
The Apple stock price to the projected fiscal year 2021 earnings sits at about 33 times. This is an expensive valuation on a price to earnings basis as compared to other dividend stocks.
It doesn’t seem that long ago when Apple’s price to earnings was in the teens. Back in the day when it’s growth prospects were being questioned.
Is It A Good Time To Buy Apple Stock?
We have looked at several valuation methods that suggest a range of values for Apple stock. Most noteworthy, each method indicates that Apple stock is currently overvalued.
So, it would not appear to be a good time to buy Apple stock. At least not if current value is your primary investment objective.
Apple Stock: Buy Or Sell Or Hold
Therefore, it should come as no surprise that I do not plan to buy Apple stock at this time. On the other hand, Apple is a great company.
So, I am happy to be a long-time Apple shareholder. And intend to hold my shares. But, I have no intention to sell.
Apple Stock Analysis Conclusions & Wrap Up
Apple stock has grown to a mid-size dividend stock holding in my dividend investing portfolio. But the low dividend yield and the recent sub-par dividend increases during the last 2-years lead me to this question…
Is Apple A Good Dividend Stock?
Apple isn’t a typical dividend stock, in my opinion. First of all, it doesn’t operate in a traditional steady demand industry like consumer staples or utilities. You probably won’t be able to fund your retirement expenses from Apple’s dividend payments.
Furthermore, the company’s growth is partly dependent on managing short product life cycles. Also, continual and consistent product and service innovation are required for growth.
However, I believe Apple is a good dividend stock. It can be a solid holding in a dividend portfolio for regular income.
Finally, the company is building a long track record of dividend increases. But, the Apple dividend percentage is lower than I prefer. And, lower than more traditional dividend stocks. But, dividend growth and share price appreciation have more than made up for that.
So, I will let this winner ride on in my portfolio. But look to put new money in other investment ideas for now. There are many other good dividend-paying stocks in the market for me to consider before adding to Apple at this time.
Enjoy This Apple Stock Analysis? – Then Here’s More Reading
- IBM stock and dividend analysis
- AT&T stock and dividend analysis
- Dividends Deluxe Model stock portfolio
- One dividend investors success story
- Dividends Still Don’t Lie book review
My Favorite Dividend Investing And Finance Resources
- Trade stocks for free with the Webull app
- Get stock research from Morningstar
- And stock analysis from Motley Fool
- Or dividend stock recommendations from Simply Investing
- Manage your finances for free with Personal Capital
- And check your credit score for free too!
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