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Dividend Wealth Journal: The Greatest Dividend Stock Ever There’s one company I have in my dividend portfolio that stands above the rest, despite paying only a small dividend in terms of percentage. It’s Apple, and I believe it to be one of the most misunderstood stocks on the market. Apple has a cult following, phenomenal revenue, earnings, and growth… Their dividend yield is only about .44%... Certainly not what we’d typically look for or expect from a “dividend stock”. But that doesn’t bother me because Apple consistently has the biggest stock buybacks in history. Every year they buy BILLIONS of dollars in their own stock, removing the shares from circulation. Apple has bought back over $429.1 billion worth of its own stock over the last 5 years. That’s more than any other company in the world. In fact, across all of the companies in S&P 500 added together, there have been $3.9 trillion in stock repurchases over the last 5 years which means Apple — 1/500th of the stocks listed — has made up more than 10% of all buybacks by itself! Buybacks are one of the most powerful advantages for stockholders because they instantly increase the ownership stake in Apple over time as Apple buys back more shares without the investor ever having to buy more shares. This in turn entitles me to a larger chunk of their profits, which compounds over time. These buybacks are what makes Apple such a good dividend stock despite its “low” dividend yield as a percentage. I think one of the biggest reasons we see these buybacks is because Apple’s management is extremely bullish on the company. You see, Apple doesn’t take the risk in developing the next big thing. They simply wait for the next big thing to come and once it has enough traction, they hop in and scoop up mass market share for a proven idea. Apple’s management is seeing the inherent value in Apple’s ability to simply jump in and scoop up markets. Take artificial intelligence (AI) for example, they’ve recently partnered with OpenAI. Their plan is to incorporate AI into their existing product lines and call it “Apple Intelligence”. All without ever having to invent the tech — and they’ll be able to take part in the AI boom without the risk of being the AI developers. They are seeing a future with a lot of potential reward and a very low level of risk due to this strategy. Apple is also a cash-rich company; that’s another reason we are seeing these buybacks. In fact, for the final quarter of 2023, Apple had over $73.1 billion in cash, that’s a 42% increase from the year prior, despite all of the buybacks. And back in May, Apple announced another $110 billion share buyback. That means if we hold Apple, we will be getting free equity ownership increases as they buy back these shares. Think about it like this: Let’s say there are only 100 Apple shares outstanding in the entire universe, and we own 10 shares. That means we own 10% of the company… Now let’s say Apple buys back 20 shares. Now there are only 80 shares outstanding… We still have our 10 shares. So, our equity percentage went from 10% up to 12.5%. And we didn’t have to do a single thing… Yet we increased the value of our equity. Here’s another way to think about it: Let’s say Apple’s dividend is .5% and stays that way… But over the course of a decade you end up with about 10X the value of shares due to their buybacks… Now Apple’s “true” dividend to you is more like 5% because your equity has increased, rather than the percentage of the dividend. But let’s say Apple’s share value has also increased 5X, which is about average over a decade for the juggernaut. Well, then your dividend is almost like 25% because you are getting paid out on more equity and a higher share price! This built-in value is why I think Apple is such a strong dividend stock. Although we don’t see a huge cash payout hit our account in terms of percentage, we see our equity ownership percentage vastly increase over time. To me, that’s just as good as a cash dividend hitting my account (in Apple’s case, even better). — Jack Carter P.S. I actually explain this rule in more depth inside my “Dividends for Life” workshop which walks you through several other key rules and about 7 other stocks to consider with these advantages. Tap here to join the workshop now! |
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