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Investors who want to cash in on Apple Inc.’s (NASDAQ:AAPL) upcoming dividend of US$0.73 per share have only 3 days left to buy the shares before its ex-dividend date, 08 February 2019, in time for dividends payable on the 14 February 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Apple can impact your portfolio income stream, by analysing the stock’s most recent financial data and dividend attributes.
5 questions to ask before buying a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it paying an annual yield above 75% of dividend payers?
- Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Based on future earnings growth, will it be able to continue to payout dividend at the current rate?
How well does Apple fit our criteria?
The company currently pays out 23% of its earnings as a dividend, according to its trailing twelve-month data, meaning the dividend is sufficiently covered by earnings. In the near future, analysts are predicting a payout ratio of 24% which, assuming the share price stays the same, leads to a dividend yield of around 1.9%. Furthermore, EPS is forecasted to fall to $11.81 in the upcoming year.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it’s dividend stocks and their constant income stream. The reality is that it is too early to consider Apple as a dividend investment. It has only been consistently paying dividends for 7 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
Compared to its peers, Apple generates a yield of 1.8%, which is on the low-side for Tech stocks.
If Apple is in your portfolio for cash-generating reasons, there may be better alternatives out there. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three fundamental aspects you should further examine:
- Future Outlook: What are well-informed industry analysts predicting for AAPL’s future growth? Take a look at our free research report of analyst consensus for AAPL’s outlook.
- Valuation: What is AAPL worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AAPL is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.