Introduction
Dividends are finances produced by lucrative procedures that are dispensed straight to shareholders, normally after the commencement of fiscal period. Subsequent to a lucrative stage, with the approval of the board members, a firm can distribute its income amongst the shareholders significantly known as dividend, while withholding some retained earnings.
Apple Inc. Dividend History
It’s not an essential action for the corporations to distribute dividends. They can also employ back all their earning into the business for various investment purposes. Analyzing the dividend policy of Apple Inc. will reveal that for quiet a long time; dividends were not given out to its shareholder. ‘Amongst 2005 and 2012, for example, Apple, Inc. (located in the United States with a stock symbol AAPL) did not pay dividends on its common stock, regardless of the fact that it showed record earnings progress within this time frame. Moreover, for the fiscal year commencing in September 2011, Apple stated a net revenue of about US $26 billion, of which $0 were professed for dividends’ (Schmidt 2014).
Apple resumed paying dividend in August 2012 after a 17-year pause. This was of crucial importance to numerous dividend-growth investors in the market. There were various prediction regarding Apples’ divided growth rate, some assuming it to be almost 15%, making it extremely desirable for retirement portfolio investment. Conversely, it has proven to be unsatisfactory for many financial investors, who had higher hopes. ‘This year they only amplified their dividend by 7.8%. The preceding year (their initial dividend expansion from the time when commencing payments again) the dividend rose by a stronger 15%’ (Carey, 2014). The following diagram depicts the dividend yield for Apple Inc. for the last three years.
As can be seen that there was a growth in the dividend yield in 2013 from 1.70% in 2012 to a higher yield of 2.30%. However, after this increment in the dividend yield we observe it reverting back to 1.70% in 2014.
Moreover, if we scrutinize the dividend per share from the following diagram, there is also a declining trend there over the past three years.
There is a sharp continuous decline in the value of dividend per share from $10.60 2012 to a staggering lower amount of $1.88 in 2014. Though, after analyzing the figure of dividend payout for Apple Inc. for the past three years, we can notice a rising trend. The following diagram highlights the figures and the rising trend in the dividend payout.
Despite the fact that dividend per share and the dividend yield is decreasing, overall the company is distributing more amount of its earning as dividends amongst its shareholders.
Dividend Policy Analysis
The dividend payouts steers in a different scenario for Apple that leads to the firm’s financially conversions from being a inconsistent nonentity into the one that dispenses its profit into new products, into more of a developed business that produces much more amount of revenue that it needs. ‘The dividend indicates a substantial financial modification for Apple, as the corporation's cash production from profitability extremely surpasses its interior requirements for extension, research and hiring. Apple's dividend is the highest new dividend ever paid by a firm, thrashing the $1.3 billion record formerly set by Cisco Systems, says S&P Capital IQ’ (Krantz).
Apple's dividend additionally exceeded the highest dividends being paid by S&P 500 businesses in the year 2012.Only Apple's dividend solitary raised the S&P 500's payment by 3.9%. The bold step of humongous dividend distribution policy, signifies the fact that Apple is the leader not only in the field of technology but also’ in music, gaming, retailing and entertainment. Apple's market value increased to a 2% after declaring the dividend to $560 billion, makes it 4.3% of the market's total market value’(Krantz), thus benefiting the company numerously.
Comparison
In this section a comparison of Apple’s dividend policy with one of its leading competitors would be discussed. ‘As per experts' estimates, Samsung's cash stack will top $100 billion over the next two years. This year, Samsung will return just 4% of its profits to shareholders, compared with 16% in 2007, according to market’ (CHENG). This reflects the fact that Samsung is also retaining most of its cash for growth purposes and showing a decline in the dividend pay out. However, recently in an effort to satisfy investors who have reprimanded it for storing the swags of fast development, Samsung has promised to deliver even more profit after nearly doubling its full-year dividend to a record $2 billion. ‘The principal competitor of Apple Inc has accumulated $51 billion in extra cash in current years by selling up to one of every three smartphones, but the quantity of profit reaching shareholders stroke to its lowest level in 2012 in five years. Still Samsung doubled its 2013 dividend yield to 1.0%, fulfilling its commitment with the shareholders made in November. However, investors still indicate and complain that it is still half of Apple's 2.0%’ (KIM).
Conclusion
Works Cited:
CHENG, J. (n.d.). Samsung Lifts Dividend But Keeps Most of Its Cash. Retrieved December 9, 2014, from http://www.wsj.com/articles/SB10001424052702304391204579180520219641740
Dividend History for Apple, Inc. (AAPL). (n.d.). Retrieved December 9, 2014, from http://www.streetinsider.com/dividend_history.php?q=AAPL
Carey, D. (2014, September 1). Apple Or Microsoft For Dividend Growth? Retrieved December 9, 2014, from http://seekingalpha.com/article/2489485-apple-or-microsoft-for-dividend-growth
Kim, M. (2014, January 24). UPDATE 3-Samsung Electronics pledges higher dividend after record payout. Retrieved December 9, 2014, from http://in.reuters.com/article/2014/01/24/samsung-earnings-idINL3N0KW5X620140124
Krantz, M. (n.d.). Apple investors get richer with big dividend payment. Retrieved December 9, 2014, from http://usatoday30.usatoday.com/money/perfi/stocks/story/2012-03-19/apple-shares-dividend-payment/53654136/1
Schmidt, M. (2014, September 1). Dividend, Ex-Dividend, Dividend Yield. Retrieved December 9, 2014, from https://www.business-case-analysis.com/dividend.html
