Investment advisors Motley Fool have suggested that the AAPL dividend could be doubled as a way of rewarding investors …
The company has an excellent reputation for offering personal finance advice, in addition to its subscription-based investment tips service. It named Apple alongside Oracle and Accenture as potential candidates for more generous share dividend payments.
Over the past six months, many companies have cut or suspended their dividends to conserve cash throughout the COVID-19 pandemic. As those streams of passive income dried up, investors likely considered themselves lucky as long as their stocks maintained their existing payments.
However, there are still plenty of cash-rich companies that can easily afford to double their existing dividends without missing a beat.
Apple reinstated its long-suspended dividend back in 2012, and it subsequently raised its payout every year. However, the stock’s multi-year rally reduced its forward yield from over 2% in 2016 to just 0.7% today.
That paltry payout won’t attract any serious income investors, but Apple spent less than 20% of its free cash flow on its dividend over the past 12 months — which suggests it can easily afford to double its current yield.
Apple, which generated over half its year-to-date revenue from iPhones, still faces short- and long-term headwinds. In the near term, It needs to nurture the growth of its services ecosystem, sell more Apple Watches and AirPods to expand its hardware business, carefully navigate the trade war, and deal with the pandemic-induced delay of its 5G iPhones later this year.
Over the long term, it needs to curb its long-term dependence on the iPhone while expanding into next-gen hardware markets. That transition could be challenging, and investors are putting a lot of faith in Apple, as its stock trades at over 30 times forward earnings. Therefore, Apple could reward patient investors for sticking around as its valuations throttle the stock’s near-term growth.
I’m not personally persuaded Apple would see any reason to do this. The gains in the share price this year would have dwarfed any dividend increase. Also, as MacDailyNews notes, the company is generally more inclined to spend its spare cash on share buybacks, which also benefit stockholders. But Motley Fool is correct that the AAPL dividend has steadily increased over the years, so it’s not impossible.
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