Apple Inc. AAPL-US USD Peer Group. Data as of Last Available Filing. Overview. Dividend Yield and Payout. September 20, 2017

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Rebecca Carpenter
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September 2, 217 Apple Inc. USD 18.73 Industry Group: Telecommunications Equipment 2 Week Range: USD 14.8 - USD 164.94 Market Cap: USD 819876.64 Mil.

Class A (GOOGL-US) International Business Machines Corporation (IBM-US) Nokia Oyj Sponsored ADR (NOK-US) BlackBerry Limited (BBRY-US) Apple Inc.

1 September 2, 217 Apple Inc. USD Industry Group: Telecommunications Equipment 2 Week Range: USD USD Market Cap: USD Mil. Data as of Last Available Filing Annual: Semi Annual: N/A Quarterly: Peer Group HP Inc. () Microsoft Corporation (MSFT-US) Alphabet Inc. Class A (GOOGL-US) International Business Machines Corporation (IBM-US) Nokia Oyj Sponsored ADR (NOK-US) BlackBerry Limited (BBRY-US) Apple Inc. () Company numbers are TTM (trailing twelve months) or latest available. Share price data is previous day's close unless otherwise stated. Overview Over the last twelve months (prior to June 3, 217), paid a high quality dividend, which represents a yield of 1.47% at the current price. Dividends paid during each of the last five years were consistently of high quality. The ending cash balance, with a dividend coverage of 6.1x, provides a substantial cushion in case of a significant reduction of cash flows in the future Dividend Yield and Payout Cash flow coverage of the dividend paid is more relevant than dividend payout. While traditional dividend analysis focuses on dividend payout from net income, we focus on the cash flow coverage of dividends (paid to the common stock) in order to determine their quality and sustainability. We assess whether dividends are being paid from operating, investing and issuance cash flows or whether the beginning cash balance is needed to make this payment. We make the assumption that cash dividends are paid only after net debt repayments. We consider the cash outflow from share buybacks to be discretionary and thus ignore its impact on cash required to support the dividend policy. CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217 1

2 Dividends that are fully covered from operating and investing cash flow net of any cash outflow from debt repayments and net of a decrease in deposits (for banks) are considered to be "high quality". Those that require an additional net cash inflow from issuance are categorized as "medium quality". If operating, investing and issuance cash flows are not sufficient to fund the dividend and the beginning cash balance is used, the dividend is referred to as "low quality". This last category is most at risk of a dividend cut though we recognize that companies that have a large cash balance could continue to pay dividends even with a "low quality" dividend profile. For all these definitions, we assume the cash outlay for share buybacks is discretionary and can instead be used to support dividends. 's dividend payout is below its peer median. Of the 6 chosen peers for the company, dividends are paid by only 4 of the stocks (non-dividend paying peers include GOOGL-US and BBRY-US). Over the last twelve months (prior to June 3, 217), 's dividend payout of 26.9% and the corresponding dividend yield of 1.47% (relative to the current price) compare to a peer median level of 37.83% and 2.37% respectively. Relative to its peers, the firm is generating a low dividend yield along with a low dividend payout, which suggests an upward pressure on dividends based on this traditional analysis. Dividend Flexibilit y Yield Flexibility Downward Pressure 4 Dividend Yield % Upward Pressure Payout Constrained Dividend Payout % Dividend Flexibility Peer Median Dividend Payout % Peer Median Dividend Yield % CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217 2

3 Dividend Payout Trend 4 Dividend Payout % TTM Peer M edian Dividend Coverage Over the last twelve months (prior to June 3, 217), paid a high quality dividend. The source of the company's cash to support the dividend paid over the last twelve months is operating cash flow (coverage of.9x), investing cash flow (coverage of -3.49x), issuance cash flow (coverage of -.8x) and twelvemonth prior cash (coverage of 4.9x), for a total dividend coverage of 7.1x. 's issuance cash flow includes outflows from net share buybacks (coverage of -2.43x). Thus, the total coverage including share buybacks is 9.3x, which reflects our assumption that the cash paid for share buybacks is discretionary and could instead be used to pay dividends. Dividend Coverage by Cash Flow (TTM ) Dividend Coverage (x) Operating Cash Flo Investing Cash Flow Issuance Cash Flow 12-mo Prior Cash (x) Total Coverage (x) Total Coverage incl Cash Flow /Dividend (x) Threshold (1x) These coverage ratio factors imply that the firm's dividends are wholly paid from operating and investing cash flows net of any debt repayments, which suggests a high dividend quality. 's dividend quality is in line with a majority of its peers, which comprise 2 high quality, 1 medium quality and 1 low quality. CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217 3

4 Dividend Qualit y (TTM ) 1 7. M edium Quality High Quality M edium Quality Coverage Low Quality NOK-US N/A High Quality Coverage Dividend Quality High Quality Threshold Medium Quality Threshold Dividends paid during each of the last five years were consistently of high quality. has paid a dividend in each of its last five years. For each of these years, the dividend was consistently of high quality. Most recently, the high quality dividend coverage has decreased to 1.63x in 216 from 2.16x in the prior year. 1 Dividend Coverage Trend (Annual) Dividend Coverage (x) High Quality Coverage (x) Medium Quality Coverage (x) Low Quality Coverage (x) Threshold (1x) 's dividend has a strong cushion from the ending cash balance. Though the dividend yield is low relative to its peers, it is of high quality in this period. Assuming the cash dividend paid remains constant, the high quality coverage would need to deteriorate by 37.7% before cash from issuance is needed to fund the dividend payment. Thus, the level of deterioration in operating performance would have to be quite severe suggesting that the current dividend quality is relatively robust. The ending cash balance, with a dividend coverage of 6.1x, provides a substantial cushion in case of a significant reduction of cash flows in the future. CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217 4

5 Ending Cash Cushion vs Dividend Qualit y (TTM ) 1 Low -M edium Quality/Strong Cushion High Quality/Strong Cushion Ending Cash/Cash Dividend ( x) 1 NOK-US Low -M edium Quality/W eak Cushion High Quality Coverage High Quality/W eak Cushion Ending Cash Cushion vs Dividend Quality (HQ) High Quality Threshold Weak/Moderate Threshold (1x) Moderate/Strong Threshold (3x) Dividend Yield vs Qualit y (TTM ) Low -M edium Quality/High Yield High Quality/High Yield 4 Dividend Yield % Low -M edium Quality/Low Yield High Quality/Low Yield High Quality Coverage Dividend Yield vs Quality (HQ) High Quality Threshold Peer Median Dividend Yield % Company Profile Apple, Inc. engages in the design, manufacture, and marketing of mobile communication, media devices, personal computers, and portable digital music players. It operates through the following geographical segments: Americas, Europe, Greater China, Japan, and Rest of Asia Pacific. The Americas segment includes both North and South America. The Europe segment consists of European countries, as well as India, the Middle East, and Africa. The Greater China segment comprises of China, Hong Kong, and Taiwan. The Rest of Asia Pacific segment includes Australia and Asian countries not included in the reportable operating segments of the company. The company was founded by Steven Paul Jobs, Ronald Gerald Wayne, and Stephen G. Wozniak on April 1, 1976 and is headquartered in Cupertino, CA. CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217

6 Disclaimer The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party's use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any of our reports, you're agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website CapitalCube 217. All Rights Reserved Apple Inc. Analysis September 2, 217 6

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