While Apple's (AAPL -0.16%) dividend yield of 1.8% may not be big enough for income investors to get excited, well-informed dividend investors know that dividend yield alone isn't the full picture. Indeed, the quality of the underlying investment, along with the potential for dividend increases in the future, are just as important as dividend yield. For Apple stock, the quality is there: Down about 17% from its all-time high, and with shares trading incredibly cheap relative to Apple's underlying fundamentals, it doesn't take long to realize the intrinsic value looks compelling at $115. But what about Apple's dividend potential? Is the potential for its dividend growth meaningful enough for income investors looking for a growing stream of stable income?

What's not to like about Apple's dividend?
Beyond dividend yield, there's little investors can really complain about when it comes to an analysis of Apple's dividend. Sure, Apple's dividend history is weak; the tech giant didn't restart its dividend until 2012. And it took Apple's cash and marketable securities swelling to around $100 billion for the company to finally decide it wanted to pay a dividend.

But forgiving Apple's underwhelming dividend yield and lack of dividend history is easy once investors take a moment to ponder Apple's cash position. Apple is hands down a cash cow. Consider some of these facts about Apple's cash position and its cash flow. 

  • Apple has $202.8 billion in cash and marketable securities on its balance sheet.
  • The tech giant's free cash flow, or cash from operations less capital expenditures, was $69.4 billion during the trailing twelve months alone.
  • Of Apple's $69.4 billion in free cash flow in the last twelve months, just $11.4 billion was spent on dividends.
  • The company's payout ratio, or dividends paid divided by earnings, is a conservative 22% -- a testament to the immense room for further increases down the road.
  • Apple's free cash flow has increased every year for nine years in a row.

All this data about Apple's cash is great. But it means little to investors seeking out a rising stream of steady income if Apple's board doesn't have an appetite for annual increases. Fortunately, however, healthy increases over the long haul look likely.

How long will it take Apple's dividend to double?
There are two ways to evaluate Apple's potential for further increases.

The first way is to take a look at the company's dividend history so far. Apple has increased its dividend each year since the dividend was reinitiated in 2012, with an average increase of 11.2%. These increases likely provide a glimpse of how the company will approach annual dividend increases in the future.

The second way to think about the potential for further dividend increases is to consider whether or not management has explicitly stated plans regarding future increases, or not. Apple's board has done exactly this, stating in a 2014 press release that Apple "plans to increase its dividend on an annual basis."

Considering how rapidly Apple's sales, cash hoard, and cash flow have continued to grow, and with no signs of any significant headwinds for Apple's business in the foreseeable future, it's looking like Apple could easily keep up its current rates for dividend increases.

Annual increases around this level would nearly double Apple's current annual payout in dividends in just six years. Another way to put it: this would give Apple's dividend a 3.5% yield in six years on today's cost basis.

Pair potential for meaningful dividend growth with the fact that Apple shares are grossly undervalued, this tech stock looks like a compelling investment for dividend investors.