The Apple Dividend: The Gift That Keeps on Giving

Last week was a big one for Apple Inc. (AAPL), and it seems that the company is just getting warmed up—on the coattails of last Friday’s new iPad launch, Apple’s board announced that it will begin paying a dividend for its fiscal fourth quarter! This is fantastic news for shareholders that have jumped on the Apple bandwagon. The dividend payment will start at $2.65 per share, working out to a 1.8% annual dividend yield.

With this move, Apple will join the likes of Microsoft (MSFT) and Hewlett-Packard (HPQ), which both have dividend yields to the tune of 2% to 2.5%. But here’s the thing: Even though these two competitors boast slightly meatier dividend yields, they cannot begin to compare in terms of fundamentals. As you can see through my PortfolioGrader tool, Hewlett-Packard and Microsoft only scrape by with a C-rating in terms of fundamentals, whereas Apple earns A- and B-ratings all down the line.

This means that Apple Inc. has managed to achieve the growth rates of an agile startup while delivering the kind of dividend that only a major blue chip can pull off. For a company that is over 35 years old, this is just about unheard of. But, the best part is that Apple isn’t even closed to finished—management also announced a $10 billion stock buyback program. This share repurchase program will start in the next fiscal year, which begins on September 30.

Apple Inc. has been awash in cash for some time now; in the last quarter it was able to grow sales 73% year-over-year and its net profit more than doubled. So, it’s great to see the company put this cash to good use by returning value to its shareholders. Investors who are long AAPL can look forward to getting better bang for their buck as the company’s earnings per share figures improve, driving up the Price/Earnings ratio as well. I am always a big fan of stock buyback programs, especially nowadays, because it means that corporations are taking advantage of the low interest rate environment and borrowing on the cheap to drive up their stock’s value. Considering that Apple Inc. has some $100 billion in cash at this disposal, this is a smart move.

I know that I’ve been writing on Apple Inc. a lot lately, but I cannot tell you how excited these developments make me. This week, we’re getting some data on the housing market as well as the index of leading economic indicators, and I will be sure to check in if there’s any big news on that front.

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