Markets

Will Apple, Inc. Raise Its Dividend in 2016?

AAPL Dividend Chart

Ever since reinstating its dividend in 2012 , Apple has consistently boosted its dividend and overall capital return program each year. For the most part, Apple has aggressively focused on allocating the majority of its capital returns to share repurchases, although it appreciates that income investors will demand some increases in yield at the same time.

AAPL Dividend data by YCharts .

Most recently, Apple expanded its capital return program to a whopping $200 billion in April, following its typical timeline of annual updates every March or April. In chronological order, Apple's annual dividend increases since 2012 have been 15%, 8%, and 11%. The most recent dividend increase was in May 2015, bringing the quarterly payout to $0.52 per share. At current prices, that represents an annual yield of approximately 1.85%.

There should be little doubt that Apple will indeed raise its dividend again in 2016. After all, with nearly $150 billion in net cash on the balance sheet, Apple can clearly afford it and it has made capital returns an important financial priority. The question is by how much.

Data source: Apple.

In addition to all that cash on hand, Apple continues to be incredibly profitable and enjoys healthy cash flow. The Mac maker's payout ratio of dividends compared to earnings per share was a modest 27% last quarter, which is about in the middle of the range that it fluctuates within.

On average, analysts expect Apple to generate $10.73 in earnings per share next year. If the company decides to pay out 25% of that, then that would translate into a quarterly payout of $0.67 per share. That would represent a 29% increase over the current quarterly payout, which is probably a little too much of an increase to expect.

The arguably more important question is how much Apple may or may not raise its share repurchase authorization. I'm a huge fan of Apple's repurchase program because its sheer size guarantees that it will be meaningfully accretive to investors, which it has been thus far. Apple's current share repurchase authorization is $140 billion, after the Mac maker added $50 billion in authorization to it earlier this year. Through the end of September, Apple had repurchased a cumulative total of $103 billion in stock.

By the time that Apple is ready to update its capital return program (March or April), another two fiscal quarters will have passed. At that point, it's quite likely that Apple will be approaching its $140 billion authorization limit (Apple normally repurchases $5 billion to $10 billion per quarter) and will need to boost the authorization again.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Will Apple, Inc. Raise Its Dividend in 2016? originally appeared on Fool.com.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AAPL

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More