5 Reasons You Should and Should Not Buy Apple for the Dividends, According to Experts

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Apple is a household name and one of the most valuable companies in the world. Known for its innovative products and exceptional brand loyalty, it has become a staple in many investors’ portfolios.

However, when it comes to buying Apple for the dividends, opinions among experts vary.

Here are five reasons why you should — or shouldn’t — consider Apple’s dividend stock strategy for your personal portfolio.

Reasons You Should Buy Apple for the Dividends

Steady dividend growth: Apple has consistently increased its dividend payouts over the years, providing reliable income to shareholders. Nancy Tengler, chief executive officer and chief investment officer at Laffer Tengler Investments, told CNBC: “You’re getting a 9% dividend growth over the last five years and earnings growth is expected to accelerate. So, I think this is when you can even buy here and certainly with the recent pullback, and then you plan to hold it for quite some time.”
Strong cash flow and profits: With a massive cash reserve, Apple is in a position to continue paying dividends. Its cash flow and profit-generating capabilities make it less likely that the company will struggle to maintain its dividend payments, even during economic downturns. According to Forbes, despite low dividend yields, “The company’s conservative payout ratio of 15% provides substantial room for future dividend increases, potentially doubling the payout over the next five years while maintaining financial flexibility for investments and acquisitions.”
Appealing for long-term investors: Apple’s dividend payouts are not the highest in the market, but they offer a steady source of income that can appreciate over time. For long-term investors, this stability combined with Apple’s capital appreciation potential offers a balanced risk/reward profile. According to Nasdaq, “Investors can reasonably expect annual increases for the foreseeable future, considering management has raised it for 13 consecutive years.”
Dividend reinvestment potential: If you’re looking to reinvest your dividends, Apple’s steady growth and solid dividend policy can compound over time, potentially offering solid returns through reinvestment.
Trusted brand and market position: Apple’s dominance in the tech industry provides a sense of stability that dividend investors seek. As an established leader with consistent earnings, Apple offers reassurance to dividend-seeking investors who want to avoid risky, volatile stocks.

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Reasons You Should Not Buy Apple for the Dividends

Lower dividend yield: Compared to other dividend stocks, Apple’s dividend yield is relatively low. Experts caution that if you’re looking for high-yield dividend stocks, Apple may not be the right choice. Many companies in the utility or REIT sectors, for example, offer much higher dividend yields. According to Forbes, “The current dividend of [96 cents] annually represents just a 0.5% yield, significantly below the S&P 500 average of 1.5%.”
Slow growth in dividend payments: Although Apple has steadily increased its dividend over time, the increases have been modest compared to other companies in the dividend space. Apple’s dividend increases may not outpace inflation, which could erode purchasing power for income-focused investors.
Heavy reliance on stock buybacks: Apple has a large buyback program, which means the company uses a significant amount of its profits to repurchase its own shares rather than reinvesting fully in dividends. While this helps boost the stock price, some investors looking for income might feel the company prioritizes stock value appreciation over dividend growth. According to Poole Thought Leadership, “By choosing big annual buybacks over larger dividends, Apple keeps things flexible: It’s like having an option open rather than committing to ongoing payments that don’t respond to how well the business does each year.”
Vulnerability to economic fluctuations: Although Apple has a strong financial position, it’s still susceptible to market and economic fluctuations. A downturn in consumer spending, for example, could affect its earnings and ultimately its ability to sustain dividends.
Dividend is not the primary attraction for investors: According to MarketBeat, Apple is often viewed more as a growth stock than a dividend stock. Most investors are drawn to Apple for its potential to increase in value rather than for consistent dividend payouts. If you’re seeking high yield or consistent passive income, you may wish to explore other dividend-heavy stocks.

Whether or not Apple is the right choice for dividend-seeking investors largely depends on your financial goals. If you’re looking for steady income with moderate dividend growth, Apple may fit your strategy. However, if you’re in search of higher-yielding dividends, you might want to explore other options. Understanding the balance between growth and income is key to choosing the right stocks for your portfolio.

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