Apple in solid earnings, unimpressive dividend hike
Apple Inc. (NASDAQ: AAPL) reported its fiscal second-quarter financial results on Monday after the markets closed. The iPhone giant had $2.33 in earnings per share (EPS) on $58 bln in revenue, compared to Thomson Reuters consensus estimates of $2.16 in EPS on $56.06 bln in revenue. The same period from the previous year had $1.66 in EPS on $45.65 bln in revenue.
Gross margin for the second quarter was 40.8%, compared to 39.3% in the same period last year. International sales accounted for 69% of the quarter’s revenue.
The company gave guidance for the fiscal third quarter as revenue in the range of $46 bln to $48 bln and a gross margin between 38.5% and 39.5%. There are consensus analysts’ estimates of $47.06 bln in revenue.
In terms of the segment breakdown: the iPhone segment moved 61.2 mln units, totalling revenues of $40.3 bln; the iPad moved 12.6 mln units, totalling revenues of $5.4 bln; the Mac segment moved 4.6 mln units, totalling revenues of $5.6 bln.
Tim Cook, CEO of Apple, commented on its earnings: “We are thrilled by the continued strength of iPhone, Mac and the App Store, which drove our best March quarter results ever. We’re seeing a higher rate of people switching to iPhone than we’ve experienced in previous cycles, and we’re off to an exciting start to the June quarter with the launch of Apple Watch.”
Apple may be still considered a cheap stock against the market for growth investors, but its dividend yield was a mere 1.5% or so. Keep in mind that Apple just
and recently was added to Industrial Average index.
After Apple reinstated its dividend in late 2012, the first hike was by 15%. The second dividend hike, in 2014, was roughly 8%. So, why do we expect that the hike has to go up much more in 2015? The simple answer is that Apple’s yield has to go up to make a dent in the dividend game. Taking the dividend hike to $0.60 is nearly a 28% payout hike. Still, does it seem normal that Apple, which has not used any cash yet for mega-mergers, should have such a low yield?
In fact, Apple announced that it did raise its quarterly dividend 11% to $0.52 per share, below what 24/7 Wall St. was hoping for.
What about share buybacks? The amount of stock buybacks seemed less clear going into the earnings report. Apple added $30 bln or so to its buyback plan last year, and the company has now spent over $112 bln
Jones returning capital to shareholders since it began, including a total of $80 bln in share repurchases.
Tim Cook also commented on Apple’s capital allocation plan: “We believe Apple has a bright future ahead, and the unprecedented size of our capital return programme reflects that strong confidence. While most of our programme will focus on buying back shares, we know that the dividend is very important to many of our investors, so we’re raising it for the third time in less than three years.”
Shares of Apple closed Monday up 1.8% at $132.65. Following the release of the earnings report, shares were up 1.5% at $134.65 in after-hours trading, pushing a new all-time high. The stock has a consensus analyst price target of $142.13 and a 52-week trading range of $81.79 to $133.60.