The Apple dividend is a relatively minor part of being a shareholder in Apple (AAPL), one of the world’s largest company. The company has documented incredible growth over the last decade, fueled mostly by its iPhone business, and the company continues to find ways to deliver value to shareholders. While the Apple dividend is just one part of this value, it’s still an important consideration for investors. Should Apple investors bank on the Apple dividend as a major contributor to total return in the years ahead? We analyze this and more in this full guide to the Apple dividend. You can find similar guides to other stocks we’ve done such as: Walmart, AT&T, Exxon and Disney.
Apple is a cash-generating machine that has returned approximately $422 billion in value to shareholders since 2014.1 Much of this has come in the form of share buybacks, combined with a dividend policy that presently yields an anemic 0.71% to investors.2 These buybacks have been key to underpinning Apple share price performance (up nearly 165% over the past three years),3 amid lackluster topline and bottomline growth. Whether Apple continues to appreciate going forward will depend on the following factors, individually or working in concert:
- continued share buybacks
- a return to robust growth amid 5G upgrade cycle / iPhone 12 launch
- a substantial boost in dividend payout ratio (presently around 25%)
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Apple Dividend Quick Facts
Previous Apple dividend payout:
- Last dividend payout per share: $.205
- Last dividend payment date: Aug 13, 2020
- Last ex-dividend date: Aug 7, 2020
- Trailing Dividend Yield: .75%
Next Apple dividend payout:
- Est. ex-dividend date: Nov 6, 2020
- Est. dividend payment date: Nov 12, 2020
- Est. dividend payout per share: $.205
Returning Value to Shareholders
The Apple growth story is well known to investors. The company has experienced two decades of monster growth, driven by the worldwide rollout of wireless broadband connectivity. Along the way, Apple has dominated new categories of consumer electronics devices, such as MP3 music players (iPod b. 2001 – d. 2014), broadband-enabled feature phones (iPhone b. 2007–), wireless tablet computers (iPad b. 2010–), and wearables (Apple Watch b. 2015–). Any investor fortunate enough to own Apple when co-founder Steve Jobs returned to the helm in 1996 has benefited enormously. Company shares have returned 12,400%+ over the past twenty years. Over the past decade, Apple is up nearly 1,000%.3
With gains of nearly 165% over the past three years alone, it would be easy to conclude that Apple has yet to reach the maturation phase of its business. It’s true that Apple continues to grow earnings attributable to shareholders, with diluted earnings per share expanding at an impressive 13.1% compounded annual growth rate in the five-year period between 2014 and 2019. However, this masks a slowdown in Apple’s overall business, with top line revenue growing at a 7.25% CAGR and earnings growing at a 6.89% CAGR over the same time frame.4
It’s thanks to a massive share buyback program that Apple continues to grow diluted EPS at a double-digit pace, while its top and bottom line numbers meander along with single-digit growth. Between 2014 and 2019, fully diluted EPS shares were reduced by roughly 30%, from 6.617 billion shares in 2012 to 4.648 billion at the end of 2019 (pre-split).5
In the absence of new investment opportunities, Apple has utilized its cash pile wisely by returning approximately $422 billion in value to shareholders since 2014. The bulk of this comes in the form of share buybacks. Between 2014 and the first nine months of Apple’s 2020 fiscal year, share buybacks have totaled more than $335 billion. Apple has distributed another $86 billion in dividends over the same period of time.1
Note, Apple accelerated its program of returning value to shareholders in 2018. Since that year, Apple has returned roughly $80 billion a year to shareholders through combined share buybacks and dividends, compared with $40~45 billion annually in the 2015-2017 period. Apple looks set to surpass $80 billion in returned value to shareholders in 2020, with $65 billion already delivered in the first nine months of its fiscal year.1
While other companies have paused share buybacks to reserve cash in response to COVID-19, Apple’s program continues apace. On April 30, 2020, Apple reauthorized another $50 billion in share repurchases.6 As of June 27, 2020, the company was authorized to buy up to $225 billion in shares, of which $150.6 billion had already been utilized.7
Aside from massive share buybacks, there is one other factor that has driven Apple’s 165% gains over the past three years. Apple (along with the broader market), has been helped by a re-rating of shares. Apple trades at roughly 35x trailing earnings, compared with a trailing price-earnings ratio of about 11 in 2016.8 The S&P 500 Index has gone through a similar re-rating, trading at about 34 times trailing earnings, compared with a multiple of 22x earnings in 2016.9
Given that share buybacks have been instrumental in propping up EPS growth, this area of Apple’s balance sheet will be of continued importance to investors going forward.
5G Upgrade Cycle
On October 13, 2020, Apple launched the iPhone 12, arguably its most important product refresh since the best-selling iPhone 6 was released in 2014. The company hopes the faster speeds offered by the 5G wireless standard will kick off a consumer upgrade cycle, which Apple desperately needs to revive lackluster sales of its flagship product.
Apple sold 1.39 million iPhones in 2007, its inaugural year. Sales rose for nine consecutive years, peaking at 231.22 million units in 2015. Annual sales dropped to 211.88 million units in 2016, then rose nominally to 216.76 million units in 2017 and 217.72 million units in 2018.10
In November 2018, Apple announced it would no longer break out unit sales of iPhones, iPads and Macs, arguing that unit sales figures were less important now than in the past as Apple transitioned to a services business driven by downloadable media. Many industry watchers saw the move toward less transparency as a harbinger of a further deterioration of Apple’s iPhone business. Wedbush Securities estimated annual sales at 185 million units for 2019.10
Apple is banking on 5G to boost iPhone sales. At the iPhone 12 product launch, chief executive Tim Cook delivered his address with a giant “5G” sign towering behind him on stage, underscoring the importance Apple is placing on the technology transition. Yet it remains to be seen whether the 5G switch will kickoff the consumer upgrade cycle Apple is counting on. To be clear, 5G is superior. Promised speeds are 10x faster than 4G. However, it can be argued that consumers simply won’t rush to buy 5G devices in absence of a compelling new application that takes advantage of the higher speeds.
Past network upgrades have broadened the functionality of what consumers could actually do with their mobile phones. With the EDGE networks of the 2.5G-era, the dominant applications were voice, SMS messaging and push e-mails (this was the age of BlackBerry). The faster speeds of the 3G-era introduced MMS (multimedia messaging) and helped popularize rudimentary mobile websites known as WAP sites. In addition, as consumers adopted 3G, Apple launched its app store in 2008 with an initial 500 applications.
A critical shift took place with the transition to 4G services. For the first time, the mobile broadband experience became almost indistinguishable from a desktop broadband experience. That is to say, the experience became seamless as users switched between desktop and mobile, thanks to mobile download speeds that were comparable to fixed broadband. Viewing a video, for example, was as fluid on a mobile device as it was on a desktop. It was during the 4G-era that mobile-internet usage began to accelerate, leading to widespread adoption of applications created specifically for mobile (think Instagram, Snapchat, Uber, TikTok etc.)
At the same time, over the past decade, the mobile phone has either completely subsumed or significantly displaced other consumer device categories, such as the consumer digital camera and portable music player. Apple itself discontinued making its classic iPod in 2014, though it continues to produce the iPod Touch (which shares the same form factor as its iconic iPhone but lacks a cellular network chip). In addition to the portable music player and digital camera, other major product categories the mobile-phone has replaced include: dashboard GPS navigation, home video cameras, eBook readers, digital voice recorders and portable video players.
So what then does an iPhone 12 equipped with 5G technology allow it to do that existing mobile phones don’t already do? What new applications are possible with a 5G iPhone? What existing or nascent device categories will the mobile phone devour next?
The key benefits of 5G are (1) download speeds that are advertised as 10x faster than 4G (2) improved latency—this is how fast data requests are transmitted from sender to receiver—which could benefit applications that require a continuous connection, such as mobile gaming and robotics (3) enhanced network capacity, which would allow more devices onto the network a.k.a. the internet of things (4) increased bandwidth, allowing networks to support more data.
Steve Jobs once said: “Some people say, ‘Give the customers what they want.’ But that’s not my approach. Our job is to figure out what they’re going to want before they do. I think Henry Ford once said, ‘If I’d asked customers what they wanted, they would have told me, A faster horse!’ People don’t know what they want until you show it to them. That’s why I never rely on market research. Our task is to read things that are not yet on the page.”
Yet the iPhone 12 lineup—while impressive—offers the kind of incremental improvements one would expect with a product refresh, versus the paradigm-shifting leaps that characterized the iPhone from 2008 to 2016. In other words, what Apple offers consumers with the iPhone 12 is exactly what Steve Jobs warned against: a faster horse. Apple has yet to articulate its vision of a 5G future—i.e. show customers what they want.
Consumers now replace their phones every 33 months on average,11 a replacement cycle that grows longer and longer with the maturation of the mobile device market. Comparing the 11th and 12th generations of the iPhone Pro Max, Apple’s top-of-the-line iPhone, it’s difficult to see a compelling reason to upgrade. The display screen is slightly larger. The chip is faster and more efficient. There is now High Dynamic Range video recording. All are incremental improvements over the previous generation.
One intriguing new technology that could potentially take the mobile phone forward is LIDAR, which Apple introduced in the iPad Pro in March 2020 and has now included in the iPhone 12 Pro and iPhone Pro Max. LIDAR stands for Light Detection and Ranging, and it’s used in the creation of spatial imaging. It’s one of the key technologies in autonomous vehicles. It allows cars to see.
Inside the mobile phone, LIDAR could drive an explosion of augmented reality applications. Think interactive graphics layered on top of your spatial reality. Apple has long been rumoured to be working on AR headsets and AR glasses, aiming for product releases in 2022 and 2023.12 Other companies pursuing the augmented reality / virtual reality space include Facebook (Oculus), Taiwanese handset maker HTC (Vive), Microsoft (HoloLens) and Google (Magic Leap, Glass). Apple hasn’t debuted a new product category since it released the Apple Watch five years ago, and the next decade of growth isn’t likely to come from mobile phones. Apple—and the broader consumer electronics industry—needs a new application, and that could potentially be AR/VR.
In the immediate term, investors should keep an eye on quarterly sales figures. In the first nine months of 2020, iPhone sales were essentially flat at $111.34 billion in revenue, up a modest 2.1%.13 Apple concluded its final quarter of its fiscal 2020 on September 30 and is scheduled to announce results on October 29. Don’t expect iPhone sales to be much better.
Watch the first quarter of Apple’s fiscal 2021. Pre-orders for iPhone 12 Pro began October 16 with availability beginning on October 23. Pre-orders for iPhone 12 Pro Max will begin on November 6, and will begin selling in stores on November 13. While one survey of 1,000 consumers found that only 10% would upgrade to a new 5G iPhone this fall and winter,14 other estimates suggest that 350 million to 950 million iPhones could be due for an upgrade.15
Apple dividend & financial strength
Despite lacklustre topline and bottomline revenue growth, Apple is well positioned to maintain its policy of returning cash to shareholders in the form of share buybacks and cash dividends. The company is supported by ample free cash flows from operations, amounting to $58.9 billion in 2019 and $64.1 billion in 2018.16
In addition, as of June 30, 2020, the company held a whopping $191.5 billion in cash and marketable securities. This included $20 billion in cash; $7 billion in money market funds; $30.3 billion in U.S. Treasuries and agency securities; $19.3 billion in other securities; $10.2 billion in CDs; $12.1 billion in commercial paper; $78.7 billion in corporate debt securities; and $12.5 billion in mortgage-backed securities.17 The company also had about $100 billion in debt on its balance sheet. Of that, $87 billion matures between 2020 and 2049 and carries an interest rate of 0.28%~4.78%.18
Apple maintains a dividend payout ratio of about 25%. There is room for this to grow, especially if Apple were to wind down share buybacks in favor of returning cash directly to shareholders.
Apple has declared an annual dividend of 82 cents per share (post split), for a yield of about 0.71%. This is nearly the lowest yield since 2012.2 Investors should note the company’s track record as a dividend payer is not without blemish. It started paying a dividend in 1987 and stopped in 1995, two years after the disastrous reign of former PepsiCo president John Sculley. It didn’t resume until 2012. One view is that Apple could suspend dividend payments again should it need cash to fund its next growth phase. The other view is that Apple won’t jeopardize its track record as a consistent dividend payer a second time. In the first five years, Apple’s dividend grew at double digits rates. Growth has been slower over the past two years, though still noteworthy at around 6%.19
Given Apple’s ample free cash flow and its massive cash position (relative to debt), the company is likely to maintain its policy of returning value to shareholders for the foreseeable future. There is room for Apple to raise its dividend payout ratio, especially if it decides to curtail share buybacks. Meanwhile, investors should keep close watch on iPhone revenue figures in the near-term, and whether 5G iPhones can kick-off an anticipated upgrade cycle.
Frequently Asked Questions
Apple’s current annual dividend is $.82 per share, and it is paid quarterly ($.205 per quarter).
Apple, like most companies, pays its dividend quarterly. Some companies pay semi-annually or once per year, but most pay quarterly.
To capture the Apple dividend payment, the investor must own the stock prior to the ex-dividend date. Apple’s last ex-dividend date was November 6, 2020 for the November 12, 2020 payment. The next ex-dividend date will likely be around February 7, 2021 for a payment around February 13, 2021.
Apple dividend references
2 Macrotrends. Data as of October 27, 2020.
3 Barchart. Data as of October 27, 2020.
6 Apple. Apple Reports Second Quarter Results.
7 Apple. Quarterly Report – July 31, 2020, Page 18.
8 YCharts. Data as of October 27, 2020.
9 Multpl. Data as of October 27, 2020.
11 Strategy Analytics. US Smartphone Replacement Lengthens to 33 Months.
12 The Information. Apple Eyes 2022 Release for AR Headset, 2023 for Glasses.
13 Apple. Quarterly Report – July 31, 2020, p8.
15 Tip Ranks. Get Ready, iPhone Supercycle is Coming.
16 Apple. Annual Report 2019, p23.
17 Apple. Quarterly Report – July 31, 2020, p9.
18 Apple. Quarterly Report – July 31, 2020, p17.
19 Apple. Dividend History.