Apple Commits To Yearly Dividend Increases

When Apple

AAPL
started paying a dividend for the second time (it did between 1987 and 1995 when Steve Jobs was not at Apple) in 2012 (about a year after Job’s death) it almost certainly planned on a multi-year, if not multi-decade, plan of increasing it every year. This would mean raising it every year by an amount that would not be so much that the compound effect would make it so large that it could not be raised or in an extreme case decreased.

Apple has increased its dividend the past eight years when it announces its March quarter results with the payout occurring in late April or early May. It is expected to do so again as management confirmed at its shareholder meeting last Tuesday.

Of the 17 questions during the Q&A portion one was about the company’s dividend. Courtesy of Loup Ventures the question was, “Why don’t you increase your dividend more?” Apple’s response was, “we plan annual dividend increases.”

While the company has 18 more years to go (fiscal 2013 does not count since fiscal 2012 was not a full year) it is possible Apple’s goal is to join the “Dividend Aristocrats” or companies that have raised their dividend for 25 consecutive years or more. This would occur in fiscal 2038.

Dividend history

Apple increased its dividend by almost 10% or more for the first six years but only by 6% in fiscal 2020. It will be interesting to see if Apple moves back to the 10% area (would be a $0.23 per quarter payout with its next increase) or keep it around 6% (which would be a $0.22 per quarter payout). The numbers below are the yearly dividend amounts and adjusted for stock splits.

• Fiscal 2012: $0.095 (only one quarter)
• Fiscal 2013: $0.41
• Fiscal 2014: $0.45, increased 11.2%
• Fiscal 2015: $0.50, increased 9.3%
• Fiscal 2016: $0.55, increased 10.1%
• Fiscal 2017: $0.60, increased 10.1%
• Fiscal 2018: $0.68, increased 13.3%
• Fiscal 2019: $0.75, increased 10.3%
• Fiscal 2020: $0.80, increased 6.0%
• Current: $0.82 (annualized for the first two quarters)

Yield history

Company management’s focus more on how much is being paid in dividends and not on the yield as the payouts are in their control while the yield is not. If management’s want to keep a certain yield they may be caught having to dramatically increase dividends beyond what is prudent. This can be seen in Apple’s numbers below. With the stock more than doubling from fiscal 2019 to fiscal 2020, the company would have to double its dividend to keep the same yield. And be wed to this higher amount going forward.

• Fiscal 2012: $23.83
• Fiscal 2013: $17.03, yield 2.4%
• Fiscal 2014: $25.19, yield 1.8%
• Fiscal 2015: $27.58, yield 1.8%
• Fiscal 2016: $28.26, yield 1.9%
• Fiscal 2017: $38.53, yield 1.6%
• Fiscal 2018: $56.44, yield 1.2%
• Fiscal 2019: $55.99, yield 1.3%
• Fiscal 2020: $115.81, yield 0.7%
• Current: $121.26, yield 0.7%

Amount spent on dividends

While Apple has been increasing its dividend, it has been buying back stock. This has helped to keep the absolute amount in dollars it spends on dividends in check. While the amount has risen over the years, it was flat between fiscal 2019 and 2020 and may only rise slightly this fiscal year.

• Fiscal 2011: $0
• Fiscal 2012: $2.5 billion
• Fiscal 2013: $10.6 billion
• Fiscal 2014: $11.1 billion
• Fiscal 2015: $11.6 billion
• Fiscal 2016: $12.1 billion
• Fiscal 2017: $12.8 billion
• Fiscal 2018: $13.7 billion
• Fiscal 2019: $14.1 billion
• Fiscal 2020: $14.1 billion
• December 2020: $3.6 billion or $14.4 billion annualized

Plenty of room to increase the dividend

Apple generated $3.28 in EPS for fiscal 2020. With a payout of $0.80 this was 24% of its earnings. If earnings were to remain flat for the next 25 years (yes, highly unlikely but worthwhile for this analysis), and the company were to increase the dividend by a range of 6% to 10% per year, it would take until fiscal 2035 to fiscal 2045 until it paid out the full $3.28 in earnings.

• 6% increase: $3.43 dividend in fiscal 2045
• 7% increase: $3.31 dividend in fiscal 2041
• 8% increase: $3.45 dividend in fiscal 2039
• 9% increase: $3.46 dividend in fiscal 2037
• 10% increase: $3.34 dividend in fiscal 2035