1 Good Thing About Apple's Selloff

In the fourth quarter of 2012, Apple (NASDAQ: AAPL  ) has promptly given up much of the gains it was enjoying throughout the year. The Mac maker is still up for the year, but not by nearly as much as it was in September. There's one more reason Apple's pullback is a good entry point for investors looking to get in before it resumes its upward march: its dividend yield.

A twofer
With shares closing on Friday just under $510, Apple's annual dividend of $10.60 per share translates into a yield of 2.1%. That's better than the 1.8% yield the iPhone maker was offering when it announced its dividend in March, and much more appealing than the 1.6% yield it represented when Apple started paying its dividend in August after a 17-year hiatus.

Now, not only can prospective investors get the possibility of envious capital gains when shares inevitably recover, but the company also offers a payout that can satisfy income investors. At this point, Apple's yield is in the same ballpark as other dividend-paying tech giants that have long been favorites of income investors.

Here are some other large-cap tech companies with dividend yields between 2% and 3%, in comparison with Apple.

Company

Dividend

Dividend Yield

Payout Ratio (TTM)

Market Cap

Apple

$2.65 quarterly

2.1%

6%

$484.5 billion

Cisco Systems (NASDAQ: CSCO  )

$0.14 quarterly

2.9%

23%

$104.3 billion

Corning (NYSE: GLW  )

$0.09 quarterly

2.9%

23.6%

$18.6 billion

Taiwan Semiconductor (NYSE: TSM  )

$0.50 annual

2.9%

49.8%

$85.4 billion

Texas Instruments (NASDAQ: TXN  )

$0.21 quarterly

2.7%

43.9%

$34.5 billion

Source: Reuters. TTM = trailing 12 months.

Most of these companies don't have the same growth prospects that Apple does.

Cisco's growth days are behind it, as smaller and more innovative networking companies continue to eat away at its core markets. The company is even looking to sell  its Linksys home router business, which it bought nearly a decade ago for $500 million. Corning has benefited from Apple's rise, after Apple sparked interest in Gorilla Glass, which is set to become a billion-dollar business this year. The glass maker could also see some upside on a TV upgrade cycle on the horizon.

As the dominant contract chip manufacturer in the world, Taiwan Semiconductor is a mature company that might even earn Apple's business next year in producing its A7 processor bound for iDevices. Texas Instruments is a chipmaker in transition, as it moves away from the competitive mobile chip business and focuses more heavily on embedded processing.

The more, the merrier
Apple's payout ratio looks a little stingy in that chart, but that's because Apple has paid dividends in only two of the past four quarters, so its TTM payout ratio is negatively skewed. If we isolate the past two quarters earnings and payouts, the company looks more generous.

Metric

Fiscal Q3

Fiscal Q4

Earnings Per Share

$9.32

$8.67

Dividends

$2.65

$2.65

Payout Ratio

28.4%

30.5%

Source: Apple.

Investors can thank Tim Cook for giving those dollars back, since his predecessor had some inexplicable aversion to dividends and buybacks. Apple's fundamental business is as solid as ever, and its cash pile would literally reach over 17 times the orbital altitude of the Hubble Telescope (I'm assuming Apple keeps its cash hoard in $1 bills), so those dividends will be here to stay for quite a while.

Apple's yield may still be less than those of direct peers such as Microsoft (NASDAQ: MSFT  ) and Intel (NASDAQ: INTC  ) , which boast respective yields of 3.4% and 4.4%, but it sure beats other rivals, such as Google (NASDAQ: GOOGL  ) and Amazon.com (NASDAQ: AMZN  ) , which don't pay any dividends.

As a firm believer that Apple will become the world's first trillion-dollar company within the next three to four years, I think that will be solid gains to go along with a solid dividend.

There's no doubt that Apple is at the center of technology's largest revolution ever and that longtime shareholders have been handsomely rewarded, with more than 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and, more importantly, your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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  • Report this Comment On December 30, 2012, at 1:21 AM, tychicum wrote:

    happypoordays ... you seem bitter you lost out on Apple. Hold on, maybe Obama will give out stock market shares in tech companies along with the food stamps.

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