Apple Inc. (AAPL) Dividend Stock Analysis

Today, we decided to release an in-depth look at Apple’s metrics from a Dividned Investor’s standpoint, as they’ve recently increased their dividend and with our dependability on technology, thought it to be fitting.  And actually – my girlfriend’s family is looking to buy new phones and I’m curious what they’ll do, as they all have historically been Apple device owners – phones, computers and all.  With their recent dividend increases, share buy backs and insane customer loyalty, I wanted to take time and dive into their stock with a few competitors along the way…

The Stock – Apple Inc. (AAPL)

My personal computer is approximately 9 years old. It’s just not any old computer that somehow lasted that long. It is an Apple product. From the sheer design, the flawless finish and gorgeous interface + build, well, this is a pure opportunity to be successful. From the Steve Job days to Tim Cook – no luster has been lost and from a business standpoint, AAPL has been VERY Successful. Now, some readers may not like this, but I am including them in the Technology space and not the consumer, retail, etc.. space for the purpose of my discussion and analysis. They have perfect technology when it exists and either were entrepreneurial or took something to, put it simply, make it better. The laptop, the watch, the music player, the phone. Another thing that they have – brand loyalty, wow is there brand loyalty. They make products that not only last almost 10 years, but these individuals are turning over their device for their next AAPL product. What’s interesting is that – you can average out the premium price that you pay for an AAPL product and you more than likely are at par with what you may end up spending on an inferior product. However, those products have stepped their game up and heck – I think the other products from Google, Samsung, LG, etc.. are VERY nice out there in the market, do not get me wrong there. Something about AAPL, their design, build, and “spell” they place on you as a consumer is REAL and I’ve gone through it and witnessed it all before. This is all a combination of a great business model, to increase earnings and, my favorite, pump dividends and returns back to shareholders; which is the reason for my analysis – especially due to the fact I am in the market potentially for a new laptop : )

About our Dividend Stock Screener

For those of you who are new followers, we run the Dividend Diplomat stock screener to identify potentially undervalued dividend growth stocks to analyze and potentially purchase. The Dividend Diplomats like to stick to metrics when evaluating dividend stocks for considerations of a purchase. In our comparison, we will also compare the company we are analyzing to a competitor to gauge how the company performs in their respective industry, in addition to comparing them to the broader market. Here are pieces of those metrics:

1. Price to Earnings (P/E) Ratio: We like to look for a P/E ratio that is below the S&P 500. The reason why we look for this is to show signs of undervaluation.

2. Payout Ratio: We further like to look for a company with a payout ratio of less than 60%. We choose 60% so the company has plenty of room to further expand their dividend in future years – it’s that simple.

3. Dividend Increase History: Additionally, we analyze companies that have a proven track record of increasing their dividend. We don’t go straight for the Dividend Aristocrats, but you have to have recent history, including the prior period, of increasing that yield.

With these dividend stock screening metrics, we may include additional items for consideration; however, these companies must break through the 3 barriers above. Now, onto our detailed analysis of AAPL and the other BIG players in the tech space that we all love – some may be direct competitors to AAPL, some may be helpful to or getting the “snide” from AAPL, that is Microsoft (MSFT) & Intel Corp (INTC).

1.) Dividend Yield: Funny, we have 3 different tiers of dividend – one below 2%, one above but below 3% and another above 3%. Honestly – in this situation if you are below 2% or the market as a whole you better have a great dividend growth rate. This is intriguing here, as INTC has had some dividend slow down in regards to growth (occasionally, they keep it the same such as in 2013/2014), I love Microsoft’s larger growth rate than AAPL, as they’ve become quite the cash cow as of late, in terms of just sending more cash directly back to shareholders. All 3 have appropriate yields for their correlated growth rate, for now.

2.) Payout Ratio: I love this metric when evaluating these tech companies. AAPL takes the pie with the absolute lowest, as their earnings are fairly strong, with a huge moat, not to mention their buy back program is massive. However – INTC & MSFT make sense, the higher the yield the higher the payout – except – MSFT’s is higher than INTC’s which I wouldn’t expect given their growth rate. I expect MSFT’s growth rate to slow in the future. AAPL looks nice here!

3.) Dividend Growth Rate: Okay – well AAPL has been growing their dividend for only 5 years, so keep note of that. MSFT has had a fairly long history of over 11 years and INTC has turned it off and on, something that cracks me up but makes me mad at the same time. I don’t expect MSFT’s to be as high going forward, given their payout ratio being in the mid-point, so I would expect theirs to slide in the 6-9% range going forward and Intel’s is going to be fairly consistent here. AAPL, again, with their lower yield and payout show the highest promise for continued double digit growth here! The cash machine of AAPL is real!

4.) 5-Year Dividend Yield Average: This is another fun sign to see if AAPL & others are undervalued, as if they had a yield > their 5 year yield average, then their growth has outpaced their appreciation and/or the price has dropped recently. Sadly – not one takes a slice of pie here, agh, dangit!

5.) Price to Earnings (P/E) Ratio: Similar to above – lower P/E’s are a sign of undervaluation as well. MSFT is off the books, as they are at or near the overall market as a whole. INTC is the lowest P/E with AAPL coming in second here. In the technology realm, I typically like P/E’s, actually, below 15, as I always believe their earnings should be higher due to our high dependency on technology & advancement of such products – therefore, future earnings should always be on the up trend. AAPL would look better in that ~15 range, not too alarming at over 17, but think there could be some push down on price. INTC sits okay, as of now.

Dividend Stock Analysis Conclusion

All three companies have great stories. AAPL has the allusive touch of their design, loyalty and eco-system. INTC has the power behind devices and MSFT fits into the other non-AAPL group, however, stiff competition with Android/Google. AAPL has made some massive headways as a dividend stock and I do believe they will be around for quite some time, as long as management has a great succession plan for the next 10-15 years, as well as continues their innovate first, business second mantra.

However, I don’t particularly like AAPL’s price appreciation, at the moment, given my P/E concerns above. They aren’t over-valued against the market, by any means, but for me to own tech – the P/E’s would have to be slightly lower, as the industry evolves at SUCH a rapid pace, wouldn’t you agree? Such an R&D intensive business and quite a few “dollars” go down the tube on non-released products and research – which is okay and is all part of the journey here.

If AAPL fell into the $130 range, I would HIGHLY consider purchasing. Will that happen? Not too sure, but I’ll be there if it does. OR they can have a HUGE EPS increase if we are lucky with little price appreciation… haha Christmas wishing too soon?

Anyone buying AAPL or another company above at current levels? Like the space or afraid of the constant evolution and rapid changes that occur? Would love to hear back! Also – fellow shareholders of any of the three above? Talk soon and good luck investing!



23 thoughts on “Apple Inc. (AAPL) Dividend Stock Analysis

  1. I own AAPL but am not adding at these levels. The elevated price (I think) is a result of the Buffett bump. The cloud is MSFT’s attraction but prefer IBM’s approach (assuming they get their act together). On the chip side my preference is QCOM over INTC with their patent library (though this is a contrarian play with the lawsuits).

  2. I sold my Apple stock to pay off some debt last fall. I hate that I missed out on all of the price appreciation since then as my cost was actually pretty low.

  3. Not a fan of apple products but I love the stock. Low dividend yield but the dividend growth rate is high. That and the extremely large stock pile of cash they have sitting around makes it easy to cover their dividends for some time. Great long term hold. Just wish I would have picked some up about 8 years ago before the split so many times. Great analysis, thanks for sharing.

    • Daze –

      The stock has been a cash power house, and returning quite a bit to shareholders, obviously. Yah.. would have been nice to hold some from that long ago, I think you’d be sitting fairly well…


  4. I’m both a fan of the apple products and the stock. Own both as well. Apple was actually one of our first investment, even before we’ve focused on dividends. They have grown rapidly since then, and I believe that they will continue to do so in the future. More over because they invest in certain techniques besides products.
    Wouldn’t mind to add more, but probably at a lower price level than it currently is.

    • Divnomics –

      It’s always fun when you like the stock that you own and use their products. That’s incredible that you’ve experience the ride for Apple, congratulations. I am sure the new share buy backs and dividend growth announcements have been fun!


  5. AAPL isn’t on my priority list because they’re too “fashionable”- I tend to stay away from anything that glitters or hypes, although Buffett’s faith in them makes me take a second glance. I don’t own INTC or MSFT yet either, but INTC is on my list. That’s not to say I don’t think it will continue to do well… and I’d certainly not bet against them, like that wolf mask guy (remember him?)…

  6. Awesome analysis! I don’t think I would pick up apple at this point mainly because the P/E isn’t a bargain and its current dividend yield is low. However, that may change in the future. For me, the two main factors in purchasing a stock are its dividend yield & price to earnings.

    One thing i found interesting about this article is comparing price to earning ratios of a stock to the S&P 500. I’ve always used a general rule of ~10 is a bargain, ~15 is alright, and ~20 is overvalued. But I agree with you that it makes more sense to normalize these numbers since using general rules of thumb can be arbitrary at some points!

    • Akash –

      Appreciate the input and notice against the industry and S&P, as it relates to the P/E ratio. You can really relate that to the market as a whole to see where they stand. Love the comparison to the 5 year average on the yield, as well! I agree, however, that prices are a bit high for these tech companies, but damn – they sure are pumping cash back to shareholders way, that’s for sure.


  7. Nice analysis. I have some Apple shares, but I’m not planning to add more for this price. My personal magic number is around $120. At those levels I’d jump in with more purchases, but right now I see better opportunities out there.

  8. Hey DividendDiplomats,

    tx for the good analysis! – way before i adopted dividend growth investing, i owned some apple shares and sold ’em. I could kick myself for that…anyway, mistakes happen. – Right now i like Microsoft more than Apple. I think Nadella does a terrific job and i see a lot of future potential. Unfortunately both Apple and Microsoft are not cheap right now, but MS is on my watchlist.


    • DS –

      No problem, that’s what I’m here for! I try to keep it very simple when looking at a company. Nadella does a very decent job. Let’s keep the eye on the price for movement, too high for my liking as well.


  9. Lanny,
    I went long on AAPL right before their 7-1 split, and added a small amount after. I knew I was getting a low yield, but the growth has been consistent and as you stated it has about a billion acres to grow.
    On a side note, I am a fan of the PC. Though my wife likes AAPL computers, and we both have iPhones, I just prefer the right click,
    – Gremlin

    • Gremlin –

      Hilarious and love the statement at the end. Congrats on owning them for quite a while – I am sure you’ve been “fairly happy” with the performance over the tenure thus far. Dividend growth will remain high for Apple, why? Because they have ample room and because they can.


  10. Nice analysis. I don’t own AAPL but am a big fan of the company and products. Their branch out into payments makes them very interesting and their huuuuge pile of cash means they have plenty of options available for R&D and interesting side projects. It is intriguing to watch what they do in the payments area, or if they move into a similar space as a PayPal merged with GoogleWallet. They haven’t done anything massively innovative of late, but remain an awesome company.

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