On Monday, March 19, 2012 Apple Inc. (AAPL) announced a gigantic dividend, as well as a share buyback program. AAPL is the largest business in the world by market capitalization, having recently passed the $550 billion mark. The stock has been on a tear, up almost 78% over the last 52 weeks and up 572% over the last 5 years. Apple has not interested me in the past due to the fact that I am a dividend growth investor, but the new dividend, which is the largest dividend initiation ever in the S&P 500, certainly piques my interest.
Apple has announced that the dividend payout will be $2.65 per share on a quarterly basis. This amounts to nearly $10 billion in dividend payouts per year in total. This is one of the largest dividend payouts from any company. The current yield is 1.76% based on the current price of $602.50. Although this yield is fairly small, the payout ratio of 30% leaves plenty of room for dividend growth in the future if AAPL so decides to raise the dividend. The high likelihood of Apple continuing its dominance in the personal electronics market means earnings are likely going to continue to rise which will keep the payout ratio comfortable.
Although the smart money invested with Apple years ago before the meteoric rise, I don't think now is too late to invest with AAPL. It's currently trading for a P/E ratio of 17.16, which is actually fairly low for a company that has undergone the kind of growth that Apple has. Usually a strong growth stock is priced for perfection with P/E ratios exceeding 30, but Apple is quite reasonable at these prices. With no debt and almost $100 billion in cash, Apple makes a fundamentally sound investment that just happens to now reward investors with a cash dividend.
Are you buying AAPL?
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