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Why Apple’s Dividend Yield Fell in 2017 (Hint: Stock Performance)

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2017 net sales and diluted EPS

Apple’s (AAPL) net sales rose 6% in 2017 after an 8% decline in 2016. The Americas, Europe, Japan, and the rest of Asia Pacific drove the growth in 2017 offset by Greater China. iPhone, Mac, services, and other products drove the 2017 sales growth, which was offset by iPad sales. In comparison, the 2016 decline was triggered by every region offset by Japan. Services and other products were the only segments to see growth in 2016.

In 2017, Apple’s gross margin expanded 5% after a 10% fall in 2016. Operating expenses rose 8% and 11% in 2016 and 2017, respectively. Apple saw 2% growth in 2017 operating income after a 16% fall in 2016. Other income has grown substantially in 2017 due to growing interest and dividend income offset by higher interest expense. As a result, net income rose 6% in 2017 after a 14% drop in 2016. Diluted EPS rose 11% in 2017 after a 10% decline in 2016. Share buybacks have further enhanced the EPS numbers. The company has maintained a strong free cash flow position.

How did the dividend yield and stock price perform?

The company’s dividend yield curve has dropped in 2017 after a consistent yield in 2015 and 2016. The drop in dividend yield is due to uniform growth in dividend offset by almost five times the price gain of 2016. The stock has risen 46.2% on a YTD basis. The dividend growth rate has fallen in 2017 compared to 2016. Apple’s PE of 18.4x compares to a sector average PE of 24.3x. The dividend yield of 1.5% compares to a sector average dividend yield of 2.7%.

How does the company compare to the broad indexes?

The S&P 500 (SPX-INDEX) (SPY) offers a dividend yield of 2.3%, a PE ratio of 23.3x, and a YTD return of 18.4%. The Dow Jones Industrial Average (DJIA-INDEX) (DIA) has a dividend yield of 2.2%, a PE ratio of 21.9x, and a YTD return of 23.1%. The NASDAQ Composite (COMP-INDEX) (ONEQ) has a PE ratio of 25x and a YTD return of 27.1%.

The First Trust NASDAQ Technology Dividend Index Fund (TDIV) is a dividend ETF with exposure to Apple. It has a PE of 18x and a dividend yield of 2.2%. The Fidelity Core Dividend ETF (FDVV) is a dividend ETF with exposure to Apple. It has a PE of 15.5x and a dividend yield of 3.6%.

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