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Last update on 2024-06-25

Apple (AAPL) - Dividend Analysis (Final Score: 6/8)

Analyze Apple's (AAPL) dividend performance using an 8-criteria scoring system. Final score: 6/8 - Insightful dividend analysis for 2023.

Knowledge hint:
The dividend analysis assesses the performance and stability of Apple (AAPL) dividend policy using a 8-criteria scoring system.
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Short Analysis - Dividend Score: 6

We're running Apple (AAPL) against the 8-criteria scoring system to evaluate the performance and stability of a company's dividend policy.

Criteria
Dividend Yield Higher than the Industry Average?
0
Average annual Growth Rate higher than 5% in the last 20 years?
1
Average annual Payout Ratio lower than 65% in the last 20 years?
1
Dividends Well Covered by Earnings?
1
Dividends Well Covered by Cash Flow?
1
Stable Dividends Since the Company Began Paying Dividends?
1
Dividends Paid for Over 25 Years?
0
Reliable Stock Repurchases Over the Past 20 Years?
1

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Dividend Yield Higher than the Industry Average?

Dividend yield measures the annual dividends paid by a company as a percentage of its stock price.

Historical Dividend Yield of Apple (AAPL) in comparison to the industry average

Apple's (AAPL) current dividend yield of 0.4934% is notably lower than the industry average of 1.1%. Over the past 20 years, Apple's dividend yield has fluctuated, peaking at 2.1033% in 2013 and dropping as low as 0.4871% in 2021. This declining trend, in conjunction with its relatively low present yield, suggests that Apple has not prioritized dividend distributions compared to industry peers. Instead, it's plausible that Apple has focused more on capital appreciation, as evidenced by its significant stock price increase from $0.3816 in 2003 to $192.53 in 2023. While a lower dividend yield might not be attractive to income-focused investors, those with a growth-oriented investment strategy might find Apple's capital appreciation history compelling. Additionally, Apple's steady increase in dividend per share, which has grown from $0.1893 in 2012 to $0.95 in 2023, underscores a commitment to returning value to shareholders, despite the lower relative yield.

Average annual Growth Rate higher than 5% in the last 20 years?

The Dividend Growth Rate measures the annualized percentage rate of growth of a company's dividend based on its historical dividend value. For Apple, analyzing the dividend growth rate over a span of 20 years helps us understand the company's commitment to returning value to shareholders.

Dividend Growth Rate of Apple (AAPL)

Apple's dividend history over the last 20 years shows that the company did not consistently pay dividends until 2012. Before this, from 2003 to 2011, Apple paid no dividends. Beginning in 2012, dividends were introduced, and from there, we can analyze the subsequent growth. The year 2013 shows a significant spike due to the introduction of successive payouts, but this is followed by a decline, with recent values indicating a downward trend. The average dividend ratio for this dataset is approximately 9.8891. While certain years exhibit growth rates that might exceed 5%, the recent downward trend, from 14.6341 in 2018 to 4.3956 in 2023, suggests that Apple's current dividend growth rate may face challenges. To be conclusive, we would need to apply a compounded annual growth rate (CAGR) formula on the post-2012 dividend data. Based on the numbers provided and without calculating CAGR precisely, we can infer that presenting an argument of consistently high dividend growth (>5%) would be difficult. This trend raises concerns about sustaining high dividend increases moving forward.

Average annual Payout Ratio lower than 65% in the last 20 years?

This criterion checks if the average payout ratio in the last 20 years is lower than 65%. The payout ratio is the percentage of earnings paid to shareholders in dividends. A lower payout ratio may imply that a company retains more of its earnings for growth and investment, which can be important for future profitability and increases in share price.

Dividends Payout Ratio of Apple (AAPL)

Apple's average payout ratio over the last 20 years is 12.62%, which is significantly lower than the 65% threshold. This trend is positive, reflecting Apple's conservative dividend policy and substantial earnings retention for reinvestment. The data shows Apple only started paying dividends in 2012, with the payout ratio peaking at around 29.68% in 2013 and remaining relatively stable and low thereafter. This indicates a prudent approach to balancing shareholder returns with reinvestment in the business, likely contributing to Apple's robust growth and innovation pipeline. Therefore, this trend bodes well for future dividend sustainability and the company's long-term financial health.

Dividends Well Covered by Earnings?

Dividends are well covered by the earnings.

Historical coverage of Dividends by Earnings of Apple (AAPL)

To determine the sustainability and reliability of a company’s dividend payments, it is vital to compare its Earnings Per Share (EPS) with its Dividend Per Share (DPS). High coverage indicates that a company generates sufficient earnings to not only cover its dividend obligations but also potentially reinvest in growth, thereby showcasing financial health and long-term viability.

Dividends Well Covered by Cash Flow?

Dividends well covered by cash flow means the company's free cash flow is sufficient to cover the dividend payouts. This is important as it indicates financial stability and sustainability of the dividend policy.

Historical coverage of Dividends by Cashflow of Apple (AAPL)

Analyzing Apple (AAPL)'s data, it's evident that the company consistently generates substantial free cash flow, emphasized by an impressive increase from 125 million in 2003 to nearly 100 billion in 2023. Apple started paying dividends in 2012, initially at 2.49 billion, soaring to approximately 15 billion by 2023. The ratio of dividends covered by cash flow has fluctuated but generally remained below 25%, indicating robust coverage. For example, in 2023, the coverage stood at approximately 15.09%, demonstrating that Apple’s free cash flow comfortably exceeds its dividend obligations. This trend is positive as it highlights Apple's ability to maintain and potentially increase dividends without compromising financial health.

Stable Dividends Since the Company Began Paying Dividends?

Stability in dividend payments ensures a reliable income stream for investors. If Apple's dividend per share decreases by more than 20%, it might indicate financial instability or shifts in capital allocation strategy.

Historical Dividends per Share of Apple (AAPL)

Over the past 20 years, Apple initiated dividends in 2012 with a payout of $0.1893 per share, and it has gradually increased the annual dividend since then. Particularly, the dividends grew from $0.1893 in 2012 to $0.95 in 2023. However, the data indicates that there was a year when the dividend dropped by 20% or more. This drop is noteworthy because it breaks the consistency investors generally seek in dividend-paying stocks. For income-seeking investors, such a decline raises red flags about potential financial or strategic issues within the company. Despite the overall strong upward trend, this single sizeable drop could concern an investor relying on stable or gradually increasing dividends.

Dividends Paid for Over 25 Years?

Assessing whether Apple has paid dividends for over 25 years involves reviewing historical dividend payments. Consistent payment of dividends over an extended period typically signifies financial stability and a commitment to returning value to shareholders. It is an important indicator for investors seeking reliable income streams.

Historical Dividends per Share of Apple (AAPL)

The data reveal that Apple (AAPL) started paying dividends in 2012, with an initial dividend per share of $0.1893. Over the subsequent years, Apple has seen a consistent increase in dividends per share, reaching $0.95 in 2023. However, Apple does not meet the criterion of having paid dividends for over 25 years, as it has only been paying dividends for around 11 years. While Apple's escalating dividend payments indicate a positive trend in shareholder value return, the company fails to meet the 25-year threshold, which makes it less appealing for investors who prioritize long-term dividend history. Nonetheless, the rapid increase in dividends suggests strong confidence in its future earnings potential.

Reliable Stock Repurchases Over the Past 20 Years?

Reliable stock repurchases are important as they indicate a company’s commitment to returning value to shareholders by reducing the number of shares and hence increasing earnings per share.

Historical Number of Shares of Apple (AAPL)

Over the past 20 years, Apple (AAPL) has demonstrated consistent stock repurchase activity, particularly from 2013 onwards. The number of shares has decreased year-over-year, a trend that is beneficial for shareholders. Specifically, shares outstanding decreased from 26.4 billion in 2013 to 15.7 billion in 2023, representing a significant reduction. This consistent buyback program indicates robust financial health and a proactive approach to enhancing shareholder value, lending positive momentum for investor confidence. The average repurchase rate of -1.1752 suggests strong buyback practices.


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