Should Apple Inc (NASDAQ:AAPL) Be Part Of Your Portfolio?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Over the past 6 years, Apple Inc (NASDAQ:AAPL) has returned an average of 2.00% per year to shareholders in terms of dividend yield. Let's dig deeper into whether Apple should have a place in your portfolio. Check out our latest analysis for Apple

5 checks you should do on a dividend stock

If you are a dividend investor, you should always assess these five key metrics:

• Is its annual yield among the top 25% of dividend-paying companies?
• Does it consistently pay out dividends without missing a payment of significantly cutting payout?
• Has dividend per share amount increased over the past?
• Is its earnings sufficient to payout dividend at the current rate?
• Will the company be able to keep paying dividend based on the future earnings growth?

Does Apple pass our checks?

The company currently pays out 25.18% of its earnings as a dividend, according to its trailing twelve-month data, which means that the dividend is covered by earnings. However, going forward, analysts expect AAPL's payout to fall to 21.85% of its earnings, which leads to a dividend yield of 1.81%. However, EPS should increase to $11.78, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Unfortunately, it is really too early to view Apple as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Apple generates a yield of 1.53%, which is on the low-side for Tech stocks.

Next Steps:

If you are building an income portfolio, then Apple is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer some interesting investment opportunities. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company's fundamentals and underlying business before making an investment decision. I've put together three fundamental aspects you should look at:

1. Future Outlook: What are well-informed industry analysts predicting for AAPL’s future growth? Take a look at our free research report of analyst consensus for AAPL’s outlook.
2. Valuation: What is AAPL worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether AAPL is currently mispriced by the market.
3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.