Ever since Apple (NASDAQ:AAPL) initiated its dividend in March 2012, the tech giant has increased its dividend every year in March or April. With the company recently adopting the practice of announcing its annual dividend increase alongside its fiscal-second quarter results, Apple should announce its dividend increase for 2017 next month.
Here's a close look at Apple's dividend, as well as an overview of what investors should expect from this year's increase.
Apple's dividend increases have been very consistent and predictable. Since Apple initiated its dividend in 2012, management has increased the company's dividend four times. Each time, Apple's annual dividend payments have increased by rates between about 8% and 15%, averaging compound annualized growth of about 11%.
Apple's dividend increases more recently have been very close to the company's compound average during this period. In 2015, Apple increased its dividend by about 11%. In 2016, its dividend increased by 10%.
And if this four-year track record isn't enough for investors to rest assured in management's commitment to dividend increases, management explicitly said in its 2014 press release about its capital return program that it "plans to increase its dividend on an annual basis." Further, Apple said in its update on its capital return program last year that the company would provide investors with an update on the overall program -- including dividends and share repurchases -- "on an annual basis."
Beyond management's promises for ongoing dividend increases, a quick glance at Apple's financials provides the best reason for the company's ability to consistently increase its dividend. Of Apple's annual earnings, the company is only paying out 26.5% of it in dividends, leaving plenty of room for increases. Similarly, of Apple's $52.5 million in free cash flow during the trailing 12 months, the company paid out just $12.3 billion in dividends.
No wonder Apple easily increases its dividend by about 11% annually. And no wonder management isn't afraid to promise dividend increases on an annual basis.
What to expect
Expected to report results for its fiscal second-quarter of 2017 toward the end of April, Apple should announce a dividend increase next month.
There's no reason Apple won't maintain a dividend increase near the 11% compound average growth rate for its dividends it has averaged in the past. But anything between its historical range for annual increases of 8% to 15% wouldn't be surprising.
Investors should also look for Apple to share an update on its overall capital return program, which includes authorized cash to be used for dividends and share repurchases. In April 2016, Apple expanded its authorized amount for its capital return program by $50 billion to a total authorization of $250 billion, with an expiration date of March 2018. Given that Apple had just $49 billion left of this authorization going into its second fiscal quarter of 2017, management will likely either expand its existing capital return program or announce a new authorization.