The Dividend Aristocrats are an elite group of companies that put a priority on payments to shareholders. Each is a member of the S&P 500, and all have increased their dividends for 25 or more consecutive years.
The list includes household names like Procter & Gamble (PG), which has been increasing dividends for 65 consecutive years, along with relative newcomers to the Aristocrats like IBM (IBM), which just hit the 25-year mark.
Though Apple (AAPL) has been publicly traded since 1980, it is notably missing from the small circle of Dividend Aristocrats. Many investors find that odd – after all, the company has plenty of cash.
A look at Apple’s history offers important clues about why it isn’t on the list yet, as well as an answer to investors’ biggest question: will Apple’s dividend go up?
Apple Dividend History
Apple (AAPL) wasn’t a dividend-paying company for its first ten years. In fact, it didn’t offer its first dividend to shareholders until 1987. The company paid $0.06 per share on June 15, 1987 – a figure that increased one to two cents each year until December 14, 1990. It hit $.12 per share and stayed flat through December 15, 1995, when dividends stopped.
Apple didn’t begin paying a dividend again until August 16, 2012. Shareholders received $2.65 per share on that date (not adjusted for later stock splits). Since Apple started paying dividends again, shareholders have seen annual increases each year.
When adjusted for stock splits, Apple’s dividend history looks like this:
- 2012 – $0.095 (dividends were paid for one quarter)
- 2013 – $0.41
- 2014 – $0.45
- 2015 – $0.50
- 2016 – $0.55
- 2017 – $0.60
- 2018 – $0.68
- 2019 – $0.75
- 2020 – $0.80
What changed in 2012? Did Apple increase profits or improve its cash flow?
The years in which no dividends were paid can be traced back to Apple’s founder and CEO, Steve Jobs. In short, Jobs was not a proponent of dividends for a variety of reasons, including related tax liability. The periods in which dividends were paid included the time when Jobs left Apple (1985 – 1997), and then not again until after he stepped down as CEO in August 2011.
Have Apple Dividends Gone Up Under Tim Cook?
Current CEO Tim Cook’s philosophy on dividends is somewhat different from Jobs’. Under Cook, Apple has started paying out again, and there have been consistent annual increases. However, dividends aren’t as robust as one might expect, given Apple’s enormous profits, and the yield comes out to roughly 0.6 percent.
In the past year, Apple (AAPL) spent just 15 percent of its free cash flow on dividends – a total of $14.3 billion. Since fiscal 2012, Apple’s total spend on dividends per fiscal year is as follows:
- 2012 – $2.5 billion (dividends were paid for one quarter)
- 2013 – $10.6 billion
- 2014 – $11.1 billion
- 2015 – $11.6 billion
- 2016 – $12.1 billion
- 2017 – $12.8 billion
- 2018 – $13.7 billion
- 2019 – $14.1 billion
- 2020 – $14.1 billion
The company puts far more emphasis on buybacks, which increase the value of outstanding shares without accompanying tax expense. Over the past 12 months, a full $82.4 billion of free cash flow went to buybacks.
In addition to repurchasing shares, Apple invests available cash into the business. That includes updating hardware, enhancing software, and expanding its ecosystem. The funds make exploration of new technologies possible. For example, Apple’s current augmented reality project and its push to develop connected cars are a direct result of the company’s access to cash.
Of course, even with these investments, Apple has more than enough to increase shareholder payouts. Will Apple’s dividend continue to go up?
Will Apple Dividends Go Up Again?
Apple is expected to have another extraordinary year as consumers upgrade to 5G technology. Some analysts project revenue to increase as much as 29 percent, with earnings going up by 58 percent. That means Apple can afford to boost dividends, and it looks like CEO Tim Cook is onboard.
On February 23, 2021, Apple held a shareholder’s meeting, which included a Q&A session. Cook was asked why Apple “doesn’t increase the dividend more,” and he made the following points:
- The company’s primary focus is on long-term value
- Since dividends started again in 2012, dividends per share have “more than doubled”
- Dividends aren’t the only option for creating shareholder value
- Investing in innovation and technological breakthroughs are the true drivers of Apple’s long-term success
However, with all of that said, Cook did make a commitment by noting, “We plan for annual dividend increases.” It appears that Apple does intend to become a Dividend Aristocrat after all. If the company continues to increase dividends every year, it will join the Dividend Aristocrats in fiscal 2038.
How Much Will Apple Dividends Go Up?
There is no guarantee when it comes to how much Apple dividends will increase, even if Cook keeps his commitment to annual raises. However, an examination of increases in the years since Apple started paying dividends again does show a pattern:
- 2014 – 11.2 percent increase
- 2015 – 9.3 percent increase
- 2016 – 10.1 percent increase
- 2017 – 10.1 percent increase
- 2018 – 13.3 percent increase
- 2019 – 10.3 percent increase
- 2020 – 6.0 percent increase
Outside of 2020, the company offered dividend increases of approximately 10 percent – and 2020 was such an unusual year that it can be omitted from any examination of patterns altogether.
If Apple returns to annual increases that are around 10 percent, the total payout would be $3.34 in fiscal 2035 – equivalent to Apple’s $3.28 earnings per share in fiscal 2020.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.