The infographic above visualizes Apple’s historical dividends and dividend yield since 2012. How much dividend does Apple pay? Is the amount on average, more, or less? But before diving into this trillion-dollar company, let us briefly clarify what a dividend is.
What Is Dividend?
A dividend is a sum of money that a company distributes to its shareholders out of its earnings. The company may issue a dividend in the form of cash, shares of stock, and so on. The company’s board of directors determines the amount of dividends.
Not every company pays dividend; especially many tech companies and rapidly-growing companies do not pay dividend. They rather reinvest all of their profits back into the company. These reinvestment can be used for various activities including funding new projects, company acquisition, and debt payment. Even some big techs such as Alphabet, Meta, Amazon, and Tesla have declined to issue dividends.
On the other hand, larger, more established companies with more predictable profits usually pay dividends regularly. Especially, companies in the basic materials industry, oil and gas industry, banks and financial industry, healthcare and pharmaceutical industry, and utilities industry tend to issue regular dividends. One of the reasons for their regular dividends is that they wish to increase shareholder wealth on top of normal growth.
How Much Dividend Does Apple Pay?
As mentioned above, many technology companies including Tech Giants do not pay dividend. However, Apple, the most valuable company in the world as of March 2022, resumed its dividend payment in 2012 after postponing for 17 years.
Historically the company had always issued dividend since 1987 before it stopped in 1995. But mid 1980s to early 1990s was a tough time for the company. In those days, the financial condition of the company was not as good as it is today. There were even merger talks around Apple. In an acute effort to save the company from bankruptcy, Apple announced it would not pay Q4 1995 dividend.
By 2012, Apple had accumulated enough cash from iPhone, iPad, iPod, and Mac sales. On 19th March 2012, the company announced its plan to initiate a dividend later the same year. Apple was now confident in the future of its business. Peter Oppenheimer, Apple’s CFO said in the announcement:
Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs. We are extremely confident in our future and see tremendous opportunities ahead.
It started paying a dividend of $2.65 per share from Q4 2012 as promised. The amount of Apple dividends hit $3.29 per share in Q2 2014 but dropped to $0.22 per share as of Q1 2022. Now, we know how much dividend Apply pays—but is the amount reasonable for the most valuable company?
Is Apple Dividend Too Less?
Apple pays $0.22 quarterly or $0.88 annually per share as dividends at the moment. To get a grasp of where this amount stands, let us work out two indices: dividend yield and dividend payout ratio.
Dividend yield is a simple ratio of how much a shareholder receives as dividends per dollar invested. It is calculated as follows:
As the formula above shows, the denominator is price per share; this means an increase in price per share reduces dividend yield, and vice versa. Even though a higher dividend yield seems to be attractive, it can be simply because of stock price falls. At the same time, a new, smaller company that is growing rapidly may have a lower dividend yield than older companies in the same sector. Moreover, it is worth noting that the dividend yield of companies in the technology sector is lower than average.
Apple’s dividend yield as of 9th March 2022 was 0.54% and it has been somewhere between 0.5% to 0.55% for the last few months. These values seem to be low, considering the average dividend yield of companies in the technology sector is 3.2%. Especially, Apple’s dividend yield of 0.54% is lower than the average dividend yield of tech companies in the S&P 500 at 1.5%.
However, Apple’s low dividend yield may not necessarily mean the company is too stingy to spend more on dividends. As we have covered in our previous article “Visualized: Apple Market Cap & Reasons It Might Grow Further,” Apple has expanded its businesses at an unprecedented speed over recent years. The spike in its share price can be one reason for the low dividend yield of the company.
Dividend Payout Ratio
Investors and analysts may use dividend payout ratio to determine the level of maturity of a company. If a company is new and growing and expanding rapidly, it tends to reinvest much of its earnings into its business. Such companies have a lower payout ratio or sometimes 0%. On the other hand, an older and mature company may have a payout ratio of 100%, paying all of its earnings as dividends.
Additionally, dividend payout ratio is an indicator of a dividend’s sustainability. If a company’s dividend payout ratio is steadily rising, the company may be a healthy, maturing business. On the other hand, a surge in dividend payout ratio may mean the company’s dividend is not sustainable.
Now, dividend payout ratio is calculated using the following formula:
The total amount Apple spent on dividends in 2021 was $14.467 billion. Its net income for the fiscal year 2021 was $94.68 billion. This gives a dividend payout ratio of 14.467 billion/94.68 billion = 0.1527… ≈ 15.3% for 2021. Similarly, Apple paid dividends of $14.081 billion for 2020 and $14.119 billion for 2019. And its net income for each year was $57.411 billion and $55.256 billion, respectively. The dividend payout ratio is then 24.5% for 2020 and 25.6% for 2019.
As we have worked out above, Apple’s dividend payout ratios have been around 15% to 25% in the recent three years. Considering Apple is a tech company that requires continuous investment for research and development to grow, it is fair to say payout ratios of 15% to 25% are a good range. For comparison, the dividend payout ratio of Microsoft is 25% as of December 2021.
Key Takeaways | How Much Dividend Does Apple Pay
Apple resumed dividends payment after a 17-year halt in 2012 as its financial conditions improved. For Q1 2022, Apple pays $0.22 quarterly per share as dividends. The dividend yield of Apple has been somewhere around 0.5%, which is lower than the average dividend yield of companies in the technology sector. Apple’s dividend payout ratio has been between 15% to 25% in recent years. One might feel that Apple is being stingy on dividends, but the amount can be justified given the following facts: Apple’s share prices have skyrocketed in recent years, which would have given lower dividend yield; Apple’s peer group, especially other Tech Giants, have declined dividend payments.