Longtime investors in Apple (NASDAQ:AAPL) probably bought the stock for its tremendous growth prospects, and the company has delivered. Over the past decade, Apple has gained 971%. What some investors may not be aware of is that the stock has become something of a dividend powerhouse.
In the Dividend Stock Hour that aired on Fool Live on Oct. 29, Fool.com contributors Danny Vena and Jason Hall discuss Apple's evolution from growth stock to dividend icon.
Danny Vena: We're going to be talking dividends stocks this hour. I know that Jason should be here any time, but just to kick it off, I can talk a little bit about my process. I don't necessarily go looking for dividend stocks. I feel like dividend stocks come looking for me. I'm more oriented toward growth stocks, but there are a number of really good growth stocks here that also pay a dividend and will eventually become really solid dividend payers.
One of the key portions of my portfolio that as far as dividend payers goes is Apple. Apple stock wasn't even a dividend payer when I first added Apple to my portfolio a decade or more ago, I think. Apple first started paying its dividend back in 2012 and since then has become something of a dividend powerhouse.
I'm sure many investors recall that when Steve Jobs was at the helm, he was firmly against paying dividends to investors. He preferred to put all of the Apple's money into the growth of the business and look forward to the future, and had received a lot of pressure from a number of different quarters about potentially paying a dividend. After Steve Jobs was no longer with Apple and sadly no longer with us, such a genius and such an innovator, then Tim took the helm and Tim Cook decided that paying dividend was a way to go.
Boy, I'll tell you what a solid dividend payer Apple has become over the last few years. In fact, what I'm going to do here is I'm going to pull up a chart here just to show what a solid dividend payer Apple has become.
Jason Hall: I'm here. I think the whole world is having some challenges this morning. Hey, Danny.
Vena: Hey, there's Jason Hall.
Hall: Back to telling us about Tim Cook and the incredible job he's done at Apple, which has become a secret, wonderful dividend investment.
Vena: Absolutely. I'm going to go ahead and pull up a chart here and just make a quick change to it here. We all know that Apple has been paying a dividend now, going back to 2012. I'm going to go ahead and throw 2012 in there. I guess, it needs a little bit more help from me here. But I mean, honestly, if you look at the dividends from Apple here, I mean what a solid dividend payment icon it's become (Step chart showing Apple's dividend growth since 2012). Apple's dividend is up 116% -- more than double since Apple started paying that dividend back in 2012. Just a really solid dividend payer.
Hall: Brian Feroldi, our colleague who spends a lot of time on here and does a ton of stuff for members of many of our services, he has often said that sometimes the best dividends stock to buy is one that's not paying a dividend yet and Apple is a great example of that.
This is a company that was hypergrowth for a number of years, and then because its cash flows became so immense, management under Tim Cook's stewardship made the decision that because the business is kicking off so much free cash, we can't allocate all of it back into the business to continue growing the business. We have so much excess cash, we need to do something with it. Giving some of it back to investors in dividends is a smart capital allocation move, because a lot of cash that belongs to somebody else, when you're a manager of a company, can sometimes lead to really dumb decisions as investors.
Think about it as an investor. Sometimes you feel like you have to do something, and sometimes the best thing to do is nothing. We'd have a bunch of cash sitting on the balance sheet. Sometimes the best thing to do is get rid of that cash and send it back to the people that invested in your company. Tim Cook, I think, has done an incredible job and I don't think he gets, its near enough credit for helping to keep that momentum with Apple turning it into what's become a great dividend stock.