According to a recent survey conducted by Bloomberg the technology giant Apple Inc. (NASDAQ:AAPL), the world’s most valuable and profitable company, is poised to increase its dividend.
Analysts polled indicated that Apple Inc. (NASDAQ:AAPL), which resumed paying a dividend in August 2012 after a hiatus of many years, will spend nearly $16 billion in 2013 and raise its quarterly payout by over half to $4.14 a share. The resulting 3.7% yield would top all but 70 members of the S&P 500. Apple Inc. (NASDAQ:AAPL) may actually begin to return some of the $137 billion in cash it has on hand to its shareholders.
And speaking of large dividend boosts many companies increased their 2012 payouts by much more than the historical market average. Note that in the period between 1960 and 2012 the members of the S&P 500 posted a 5.2% compounded annual dividend increase (and 4.1% since 2000).
One of the biggest dividend growers last year was Paychex, Inc. (NASDAQ:PAYX). The company, which supplies payroll, HR and employee benefits services to small and medium sized businesses, more than doubled its payout to $0.66 per share. Paychex, Inc. (NASDAQ:PAYX) has a long history of steadily increasing its dividend. The stock now yields a healthy 3.9%. However, unless it can improve earnings growth, projected to be about 10% per year, Paychex, Inc. (NASDAQ:PAYX) may have trouble increasing the dividend as much in the future as its payout ratio (dividend divided by earnings per share) is now approaching 85%.
The medical testing company Quest Diagnostics Inc (NYSE:DGX)
increased its dividend from $0.17 to $0.30 per share in 2012. It now yields about 2.2%. With a very low payout ratio (17%) and with earnings and free cash flow growth forecasted at 10% per year Quest Diagnostics Inc (NYSE:DGX
) should be able to keep those juicy dividends flowing. And the stock is reasonably priced with a P/E (14) lower than its historical average (16) and the rest of the industry (46).
International Business Machines Corp. (NYSE:IBM)
has also been a reliable dividend grower. Since 1997 “Big Blue” has raised it by 372%. The quarterly payout is now $0.85 per share and the stock yields 1.6%. In addition to the superior dividend growth, the company has been returning more value to shareholders by embarking on a stock buyback program. In spite of relatively flat revenue gains earnings have grown modestly and allowed International Business Machines Corp. (NYSE:IBM
) to become one of the Dow Jones Industrials’ best performers since the end of the Great Recession.
Wal-Mart Stores, Inc. (NYSE:WMT)
, although only increasing its dividend by 9% last year, has a strong record of long-term growth. The payout has gone up by 400% since 2003 and 800% since 1997. The stock now yields about 2.6%. The low-end retailer from Bentonville, AR has raised its dividend every year since inception in 1974. It made headlines late last year by moving its normal first (NYSE:FHN
) quarter 2013 payment into 2012 in anticipation of higher taxes for some shareholders. It plans to pump up the dividend by 18% this year and distribute the next payment in early June.
If Apple actually increases its dividend and joins the ranks of other companies that routinely do, I believe it will provide great value to its shareholders.
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