Apple (NASDAQ: AAPL) offers investors a tiny 0.5% dividend today.
However, most investors are overlooking the company’s $88.4 billion secret dividend.
These payments directly benefit shareholders – even though they aren’t your typical dividend cash distribution.
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Apple founder Steve Jobs passed away on October 5, 2011.
At the time – many investors thought that Apple’s days of innovation were coming to an end. And many thought that the stock would suffer as a result.
Yet the next year Apple’s new CEO Tim Cook made a major change.
Apple would begin paying dividends and authorized a $10 billion share buyback program. And the company has repeatedly raised its dividends and buybacks since then.
Why Income Investors Should LOVE Apple’s Buybacks
Apple’s aggressive stock buyback program is critical to the stock price growth.
The company is constantly buying its own stock. If AAPL stock is temporarily out of favor – the company steps in to buy shares. And this creates ongoing support in the market for the share price.
In the last 11 years Apple has spent $572 billion buying back its stock.
This chart of AAPL shows exactly how a huge buyback program can fuel stock gains. The stock is up more than 1,000% since Apple initiated its buyback.
I personally bought AAPL in September 2011 – days before Steve Jobs passed away. And it’s been one of my best investments ever…
I’m currently “LONG” the stock and sitting on 1,274% gains.
Let’s take a look at how Apple distributed cash to shareholders last year:
- Quarterly dividends = $14.8 billion
- Stock buybacks = $88.4 billion
This means that Apple’s buybacks are 6-times larger than the regular dividend.
Apple ended last year with a $2 trillion market capitalization. The company’s regular dividend provided shareholders with a small 0.7% yield.
Yet the stock buybacks resulted in a 4.4% yield.
The combined dividend + buyback yield was more than 5%.
The key lesson is that dividends matter – especially if you’re investing for income.
However, many great companies like Apple are using stock buybacks to compliment the dividend. If you ignore the buyback – you’re going to overlook some of the best stocks for building long-term wealth and consistent income.
Many of the best dividend stocks yield less than 2%. Keep an open mind – and continue searching for the best stocks that are committed to their shareholders.
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P.S. Want to know how stock buybacks work?
Dividends and stock buybacks are a way for a company to return cash to shareholders
Most income investors focus on the dividend and dividend yield. However, stock buybacks are equally important factor that can contribute to long-term capital gains.
When a company buys back its stock – that reduces the number of shares outstanding. This in turn increases the earnings per share. And typically translates into a higher share price.
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