Apple Inc. (NASDAQ: AAPL) resumed its dividend payments in 2012 after a 17-year hiatus. At the end of its fiscal year 2011, it had accumulated, from its early success of the iPhone and iPad, an enormous amount of cash and other cash equivalent holdings of over $25 billion. Since then, Apple has seen a continued rise in revenue and earnings each year through 2015, allowing it to increase annual dividends for the three years following the initial quarterly dividend payment in 2012. For the six months from Dec. 27, 2015, to June 25, 2016, or the company's fiscal Q2 and Q3 of 2016, the AAPL dividend continued to grow at an even higher rate.
Apple's gross dividends totaled $5.996 billion for the six months that encompassed the company's fiscal Q2 and Q3 of 2016, seemingly surpassing past dividend payments from any other two continuous quarters since it reinstituted quarterly dividends in 2012. The combined net income for Q2 and Q3 of 2016 was $18.321 billion, which put the dividend payout ratio at 32.7% for those six months. This compares to the average dividend payout ratio of 25.9% for the three years between 2013 and 2015.
The higher dividend payout ratio for the past six months rests on the fact that Apple's revenue and earnings have been growing continuously for the previous five years, with a total accumulated equity capital of $119.4 billion as recorded on Sept. 26, 2015, the end of Apple's fiscal year 2015. This compared to a holding of $41.6 billion in cash, cash equivalents and short-term investments on the same date. With the amount of idle cash at 34.8% of Apple's equity capital, shareholders were surely better off as Apple considered to return potentially more of its capital back to shareholders for their own uses in 2016.
While dividend payout is a measure of financial strength often used in fundamental analysis of stock investments, dividend yield is more useful for investors with an overwhelming goal of receiving investment dividends. For dividend investors, a stock's capital appreciation is secondary to the dividend income that the stock can provide. A stock's dividend yield compares the amount of annual dividend as a percentage of the stock's market price. For individual investors, their own purchase prices on a stock may lift or lower their dividend yields, given how much the stock pays in dividends.
Apple's dividend on a trailing 12-month basis was $2.13 per share annually as of June 25, 2016. Using the stock's closing price of $107.57 on Aug. 25, 2016, the dividend yield from investing in Apple stock was 1.98%. Even though the annual AAPL dividend has consistently increased in the years after the company's 2012 dividend reinstatement, Apple stock has at times risen at much faster rates, potentially resulting in its dividend yield being less competitive for new investors buying the stock at premium prices. If Apple is committed to a strong and growing dividend policy, existing dividend investors will see further improvements in their dividend yields.
For most companies, a dividend cut is an exception, rather than the norm. Companies would like to grow their dividends over time, depending on the growth of their revenue and earnings, as well as cash flow from operations. The AAPL dividend for the six months from Dec. 27, 2015, to June 25, 2016, totaled $5.996 billion, a slight increase of 2.5% over the amount of dividend paid during the prior six months. Annual dividend growth averaged 4.6% for the three years from 2013 to 2015, assuming annualized dividend payments of $10 billion in 2012 based on the quarterly dividend of $2.5 billion, a partial-year payment in that year. In comparison, the dividend growth rate for the six months that included Apple's Q2 and Q3 of 2016 was slightly higher than the company's historical dividend growth rate.