Collect Apple’s Secret 7.6% Dividend

Apple Inc. (NASDAQ: AAPL) is set to wow consumers once again. This time it’s with the new Apple Watch, which is available for preorder today and will be released April
Initial Apple Watch buzz suggests another hit is in the waiting. From accounts I’ve read, developers are queuing up to create game-changing apps for the new device. In one fell swoop, Apple will have again created another consumer-products category and will again dominate that category.
Apple certainly stands to benefit from the launch of the Watch. There is also a unique way to profit from the Apple Watch. Just click here for all the details.
I’ll confess that I’m not so much interested in what Apple Watch does for me as a consumer. I’m interested in what it does for me as an investor. Can the Apple Watch ensure Apple remains a high-yield dividend stock? My initial reaction is that it can.
Did I say, “high yield”? I certainly did. Few investors realize Apple’s secret: It’s actually a high-yield investment. The oversight is understandable.
When the conversation turns to income investing, Apple is rarely mentioned. The company’s $1.88 dividend translates into an uninspiring 1.5% dividend yield. Seeing the yield, many income investors move on. Perhaps they should reconsider.
Apple’s dividend isn’t a static commitment. In 2012, when Apple initiated its dividend, it paid $2.5 billion to shareholders (Apple’s fiscal year ends in September). Over the trailing 12 months, the company paid nearly $11.2 billion in dividends.
I expect that dividend to grow. In fact, another dividend increase looms on the horizon. Apple increases its dividend each year beginning with the May quarterly payout. Next month, Apple will increase its dividend again.
But that’s not the complete story.
Over the trailing 12 months, Apple spent $45 billion repurchasing shares. This is double the amount it spent in fiscal year 2013. When share buybacks are added to dividends, Apple has returned $56 billion to investors in the past 12 months.
So, if we consider Apple from an economic perspective, it actually yields 7.6%. I arrive at that figure by dividing the total cash returned to investors ($56 billion of dividends and share repurchases) by Apple’s current market value ($730 billion).
You might think, yes, but the share buybacks don’t give me more cash to spend. True enough, but they can.
In fiscal year 2013, Apple had 6.52 billion shares outstanding. Last year, it had 5.88 million. Net income was $37 billion in 2013. Last year, it was $44.5 billion. That’s a 21% increase.
But if we look at per-share growth, we see a more impressive picture. Over the same period, EPS grew to $7.42 from $5.68. That’s a 31% increase. In other words, the same income focused on fewer shares outstanding leads to higher shareholder value.
Had Apple not bought back any shares since 2013, EPS for last year would have been $6.82. Apple’s share buyback, in essence, created a $0.60 increase in earnings per share. That earnings per share growth helped send Apple shares up 69% in the last year.
If you want more cash from your Apple investment, just sell a few shares of stock. This will put more cash in your pocket when you need it.
Apple is an income investment that every investor should consider owning today. I’m expecting that the dividend will be increased by 10% next month. Just as important, the initial share buyback program is expected to increase by 30% to $120 billion.
With the launch of the Apple Watch, Apple is solidifying its position as the world’s most innovative consumer electronics company. Apple will certainly benefit from the launch of the Watch … and so will one little-known partner. Click here to get the full story on this unique and timely opportunity to profit from the Apple Watch.

To top