There was a time when Apple (NASDAQ:AAPL) wasn’t a dividend-paying stock and investors wouldn’t associate it with payouts. This scenario has changed dramatically in recent years.
These days, the iPhone maker isn’t just an impressive dividend growth story. It is one of the biggest dollar dividend payers among corporate America. Apple’s payments-linked exchange-traded fund group includes the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM).
Both Invesco ETFs track the Nasdaq-100 index, which yields just 0.48%, or 19 basis points below Apple’s dividend yield. Most of the index’s dividend strength is tied to Apple and Microsoft (NASDAQ:MSFT), although other components come into the dividend game. While Apple’s performance is undoubtedly weak, it also implies that there is ample room for growth.
“Even beyond yield, other metrics suggest that Apple (ticker: AAPL) could do more with its payout. Based on last fiscal year earnings of $5.61 per share, the payout ratio of Apple’s dividend is around 16%, which isn’t that high, although tech companies tend to pay out a lower earnings ratio than the overall market of around 30%,” Lawrence reports. for Barron’s. “Apple also lags the broader market and even its own industry in terms of performance: S&P 500 technology companies recently returned around 1%, compared to 1.6% for the broader market, according to FactSet. .”
At first glance, it looks like Apple is cheap with its dividend. Arguably this is correct, but it’s worth remembering that the iPad maker is a relatively new dividend payer and has been a reliable dividend producer since its payment was introduced.
Additionally, Apple isn’t skimping on overall shareholder rewards, as the company is still one of the biggest buyers of its own stock.
“When it comes to capital returns, Apple is emphasizing share buybacks, which totaled about $86 billion for its common stock last year, rather than dividends. Share buybacks are seen as a way to spur earnings growth, in part because earnings are spread across fewer shares,” according to Barron’s.
Last month, Apple announced it was increasing its payout by 4.5%, which is good news for QQQ and QQQM investors, as these ETFs each allocate more than 12% of their weighting to tech stocks. Although the company appears determined to increase the payout, it has not discussed future plans for the dividend in percentage terms.
For now, Apple prefers buybacks to dividends, and in order to seriously boost the latter, the company would probably have to cut the former. On the plus side, investors can embrace Apple as a total shareholder reward game, knowing it has the resources to support both buyout and payout growth.
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Opinions and predictions expressed herein are solely those of Tom Lydon and may not materialize. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.