Since initiating a dividend in 2012, Apple (NASDAQ:AAPL) has morphed into quite an impressive dividend stock -- especially after its recent 16% dividend increase. But how does Apple stack up against legacy dividend stocks with decades of increases and more meaningful yields?

One renowned stock worth comparing to Apple is Texas Instruments (NASDAQ:TXN), which has been paying dividends since 1962. Can Apple hold its own against one of tech's best dividend stocks of all time?

Let's look at each stock to see whether Apple has evolved into a dividend stock that can compete with the best.

Apple CEO Tim Cook shakes hands with fans at an Apple store the day of the iPhone 8 launch.

Apple CEO Tim Cook in an Apple store. Image source: Apple.


Apple has a dividend yield of 1.6%. With the average yield of stocks in the S&P 500 at 1.9%, Apple certainly doesn't look like a great dividend stock on the surface. But a closer look at Apple's business and its dividends potential put the tech giant's stock on par with those known for their dividends, like Texas Instruments.

For instance, consider Apple's impressively low payout ratio: Annual dividend payments amount to just 23% of the company's annual net income. This low payout ratio not only leaves breathing room if earnings take a hit, but it gives Apple plenty of room for more dividend increases in the years ahead.

Another reason to like Apple as a dividend stock is its consistent annual increases. Adjusted for stock splits, the quarterly dividend has increased from $0.38 in 2012 to $0.73 today, compounding at an average rate of about 11.5%. Furthermore, Apple's dividend growth actually accelerated to a rate of 16% this year -- its largest hike yet.

Finally, it's worth giving some weight to the trajectory of the earnings supporting Apple's dividend. Apple has seen particularly strong earnings growth recently, with earnings per share increasing by 27% year over year in the trailing 12 months. Moreover, Apple's EPS has increased at an average rate of 8% annually over the past five years.

Texas Instruments

As you'll see below, Texas Instruments rivals or beats Apple as a dividend stock in all but one key area.

When it comes to dividend yield, Texas Instruments is a clear winner. The semiconductor company has a meaty yield of 2.4%, well ahead of both Apple's yield and the average yield of stocks in the S&P 500.

Texas Instruments also has a lead on Apple when it comes to recent dividend growth. The company's dividend has increased at an average rate of 24% over the past five years, with its most recent annual increase coming in right at this average.

Texas Instruments has been able to sustain such an impressive rate of dividend growth thanks to its strong earnings growth recently. Earnings per share for the trailing 12 months are up 34% year over year, with EPS increasing at an average rate of 13% over the past five years.

But for Texas Instruments to achieve such an impressive yield and to deliver such strong dividend growth, it's had to maintain a much higher payout ratio than Apple. Texas Instruments has a payout ratio of 56% -- in line with the 46% to 58% range its payout ratio has hovered around since 2012.

All things considered, Texas Instruments is probably a better stock for investors looking for meaningful income today. But for dividend investors who can sacrifice some dividend income today in hopes for a larger payout in the future, Apple is a close rival to Texas Instruments.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.