Apple (AAPL) Rewards Shareholders With a 10.5% Raise
First it was Johnson & Johnson (JNJ) giving us a 5% raise, then it was Exxon Mobil paying out a 2.7% raise last week. I just love it when the companies we own give us a raise in the form of annual dividend increases.
Investing our hard earned cash in quality dividend paying companies like JNJ and XOM is one way we are working towards financial independence.
Once we purchase our shares in these types of stocks, there is very little work to do at that point. We just sit back and collect (and reinvest) the dividends and get an added bonus in the form of a raise usually once per year.
Each year, as the number of our shares grow from dividend reinvestment and new money invested … our dividend income increases. Add in a 5% raise (as in the case of JNJ) and we are able to compound our earnings.
While a 5% raise every year is awesome, some companies like to hand out double digit raises (see below)!
The most recent dividend increase (or raise) from a stock we own was from Apple (AAPL).
AAPL Shareholders Get a 10.53% Raise
Apple (AAPL) recently announced an annual dividend increase. The company has been consistently raising annual dividends for the past 5 years.
Apple doesn’t have a long history of dividend increases that companies like Johnson & Johnson (JNJ) or Procter & Gamble (PG) have. However, their short history is very incredible when you think they have been handing out double digit increases annually.
Company shareholders will now receive $0.63 in quarterly dividends for each share they own … instead of $0.57 paid last quarter. This increase comes in well above our desired dividend growth rate of at least 6%.
The latest increase bumps the annual dividend for AAPL up to $2.52 per share compared to $2.28 last year.
Overall, that is a 10.53% increase in dividend income.
How Much Extra Income?
We currently own 13 shares of AAPL in our Money Sprout Index.
This latest dividend increase has pushed our 12 month forward dividend income for AAPL up to $32.76, compared to $29.64 last quarter.
That is an annual dividend income increase of $3.12 – not huge but every little bit of growth counts.
This increase is simply a reminder that our dividend portfolio is constantly growing every single day … without any extra work from us..
Dividend Growth for AAPL
We have owned shares of Apple for 5 months … which makes it one of our newest stocks to the dividend income portfolio.
Overall, the company has shown the ability to grow their dividend for over 5+ consecutive years. Even though they have a short history, Apple is on the right track to becoming a dividend great.
Take a look at the annual dividend payments since 2012 –
- 2012 – $0.76
- 2013 – $1.69
- 2014 – $1.85
- 2015 – $2.03
- 2016 – $2.23
- 2017 – $2.46 (projected)
Note – The 2017 dividend has been adjusted to reflect a dividend increase after the first quarter.
As you can tell from the numbers above, AAPL dividends have been raised consistently over the past several years.
Typically, we look for stocks with a 5-year or 10-year dividend growth rate (DGR) of 6% or higher.
Apple doesn’t have a 10 year DGR as it has only been paying out a dividend for the past 5 years. The company’s 5 year DGR is an astounding 32%! It is important to point out though that the 5 year average is skewed a bit because of a huge increase in their 2nd year.
A more reasonable average would put the company around 10% growth every year … which I will take any day.
Here are a few average growth rates for shares of Apple –
- 1 Year DGR – 10.31% (2016 to 2017)
- 3 Year DGR – 10.04% (2014 to 2017)
- 5 Year DGR – 32.47% (2012 to 2017)
As you can see from the dividend growth averages above … the company has been aggressively increasing their dividend.
Because we have been holding our shares for 5+ months now, we are earning a yield on cost of 1.93%.
Apple – Buy, Sell, or Hold?
Back in November 2016, we purchased a 2.26 shares of Apple for $110.47 per share. We had setup an automated monthly investment each month into AAPL through our LOYAL3 trading account. Over the course of 5 months, we were able to accumulate 13 shares.
Since we held these shares in the LOYAL3 account, there were no options for dividend reinvestment. However, now that LOYAL3 is shutting down, we are transferring our 13 shares of AAPL to our Fidelity account. And once those assets have been transferred, we will be setting up dividend reinvestment for this company.
At the time of this writing, AAPL only accounts for a very small percentage of the Money Sprout Index. It currently makes up 1.3% of our overall portfolio. Over time, I expect our assets to grow in this high growth dividend stock.
Since our first purchase in the company, we have earned $2.92 in dividends from AAPL.
Here are a few stats from owning stock in Apple for the past 5 months –
- Total Investment – $1,700.62
- Shares Purchased – 13
- Dividends Earned – $2.92
- DRiP Shares – 0
To date, we have earned back 0.17% of our original investment in dividends. As the company continues to increase it’s dividend, we should see our dividend income totals increase a bunch.
At the time of this writing, AAPL technically does not meet our stock screen criteria based on the following metrics –
- Current Yield – 1.65%
- Payout Ratio – 27.31%
- P/E Ratio – 17.20
The company has an awesome payout ratio well under 60% coming in at just over 27%. In addition, the P/E ratio is under the 20 threshold we look for at 17.2. Both of those metrics make AAPL an attractive investment option.
The one problem area for Apple is the very low current yield of 1.65%. Normally we look for stocks with a yield of 2% or higher.
In this case … we are making an exception based on the very high dividend growth rate. Normally we wouldn’t purchase a stock with a yield that far below 2% … but the double digit average dividend growth helps out.
Based on our current allocation of AAPL and the metrics listed above, we have the company as a BUY for our portfolio.
As long as the company continues to grow it’s dividend at the current rate, we are comfortable buying new shares with a yield under 2%. However, as that growth eventually slows, I expect the current yield to rise as the share price will slow down a bit. In the meantime, we will likely add to our position over the next 12 months on any dips in share price.
Full Disclosure – At the time of this writing, we owned shares in the following stocks noted in this post – AAPL, JNJ, PG, and XOM. The material above is not a recommendation to buy. Please do your own research on a company before deciding to invest.