Monday, January 21, 2013

Apple Dividend

We'll start from the top — with Apple, the biggest publicly traded company in the world. Apple made waves in March, when the firm announced that it would be initiating a $2.65 dividend payout — the first dividend from Apple since the mid-1990s. But with Apple sitting on a mountain of cash, the move made more sense than most other uses of the firm's bank account. Even though this stock has been under pressure for the past few months, there's still reason to believe in shares of Apple right now. Apple enjoys stellar positioning in the electronic device market. Its iPhone, iPad, and iPod lines remain massively popular, its online media distribution arm ranks as the biggest in the world, and it's literally the only PC maker that's able to command premium pricing in this market. By integrating its mobile platform across all devices, the firm makes customers much more likely to stick with the iOS universe than switch to other offerings that don't have the same compatibility. That's also contributed to the "Halo effect" that's spurred iPhone and iPod adopters to buy Macintosh computers. The demand for Apple's products right now means that the firm enjoys bigger margins than most other handset makers, and while that's not guaranteed to last forever, Apple is going to be hard to dethrone. From a financial standpoint, Apple remains in stellar shape. The firm boasts $121 billion in cash and investments, giving it ample wherewithal to keep emphasizing shareholder yield through buybacks and dividends. So far, Apple has managed to avoid the tech sector's favorite misstep of overpaying for big acquisition targets, an easy trap to fall into for firms with more cash than options. Corporate culture has a lot to do with that, and Apple remains the cash-rich firm that poses least stewardship risk in the sector. Instead, it looks likely to Apple to use that cash on a dividend hike in 2013. Until then, the firm pays a $2.65 dividend for a 2.02 percent yield. Keep an eye on Jan. 23 earnings.

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