Earlier this month, Apple made a dividend payment of $2.65 per share, generating a 1.7% or $10.60 annual dividend yield. This is a part of their plan to distribute $2.5 billion (that’s billion with a “B”) to shareholders every 3 months. If you didn’t catch that, they are paying out $2.5 billion EVERY QUARTER.
They have indicated they also plan to use some of their cash to initiate buying back stock. As with any company, this has historically caused stock prices to rise, with less shares being available. Companies in strong financial positions can do this to increase the price as well as increase the interest others have in the stock, both positive things to do when the company is strong. They also indicate they will have plenty of cash after all this to still continue product development and valuable acquisitions.
Over the next three years, their combination of dividend payouts and stock buybacks is estimated to total $45 billion in cash.
It’s important to note that when I purchased Apple stock, I had not planned on buying it as a dividend performing stock, but instead hoping it would continue it’s long path of growth. If I was seeking dividends, I wouldn’t have bought such an expensive stock that had such a low yield. I say this because I don’t want anyone to think I am endorsing Apple as a strong dividend paying stock.
I admit it’s a bit of a gamble, but I run on the assumption that people will want to keep buying their products. Things like the iPod, the iPhone, and the iPad have been incredibly successful and altered the market of consumer devices. In the software development circles that I run, the Apple Macintosh laptop and desktop computers are very popular, at least amongst software developers. I started watching Apple stock months ago, and only wish I would have started sooner. Given all that and their historical growth, I believe their stock price will continue to grow surely and steadily. The fact that they passed Exxon last year as the biggest company ever ($607 billion market value) helps out as well.
General Dynamics (GD)
On August 9th, General Dynamics paid out a regular quarterly dividend of $0.51 per share, resulting in a $2.04 or 3.2% dividend yield. This is good news, because they are keeping up with their previous dividend payouts. I happen to have already received a payout relatively soon after I bought my first position and I first posted about GD, so it was nice to receive more cash to eventually invest in more shares. I am planning to accumulate more dividend holdings before deciding which of my current stocks to invest it in.
To buy or not to buy…
As dividend payouts build up in my account, I have a decision to face: invest immediately to get more of the action, or wait a few quarters and do this once-a-year. If I invested every dividend payout as they occurred, that might put the money back into action faster, but I would be forced to possibly pay more broker fees. For now, it seems better to save up all the dividends and consider doing that once a year, and definitely when prices are at their best levels.
This is another benefit of long term dividend stock investing: there is no rush so I’m not forced into buying at a bad price. I can wait a year, two years, or even more, until I’m comfortable with the price and yield to continue my position. Though I do hope it won’t be two years before I see one of my holdings showing a good position to increase.
Finally, if you plan to purchase any stocks of your own, don’t just buy what I’m buying. Perform your own analysis, understand the company and its products, and make an informed choice.
Disclosure: Long AAPL, Long GD