The almost 600-per-cent increase in Apple Inc. share value over the last five years has made shareholders very happy. The cash-rich tech giant’s recent dividend announcement has made them even happier.
While Apple’s success is unlikely to be replicated any time soon, it is possible to identify large tech companies that are in the position of announcing a dividend.
What are we looking for? Essentially, we’re looking for more Apples – tech firms with a large market cap (at least $1-billion) and the financial means necessary to provide a dividend to shareholders. Specifically, we’re screening for high earnings per share, reliable returns on equity (which reveals how much profit a company generates with the money shareholders have invested) and substantial amounts of cash. For our purposes, both the last fiscal and five-year average ROE are taken into account.
The final criterion in this screen, provided by Bloomberg, is price to tangible book value per share, which represents the amount of money paid for each share if a company were to cease operations and liquidate its assets at the value recorded on its books.
What we found Our screen produced eight potential Apples, many of which are far from household names. It might surprise some to see Research In Motion Ltd. at the top of the list, considering the beating the stock has taken over the last year. However, for our purposes, the company fits the bill. Its last fiscal ROE was 24.4 per cent, and its five-year ROE was a blazing 36 per cent. EPS is $4.26, and it’s sitting on $1.1-billion in cash. Assuming the new CEO can steal back some market share from rivals such as Apple and Samsung, a future dividend announcement is entirely possible.
In terms of a cash hoard, none of the firms in our screen comes close to Western Digital. The Irvine, Calif.-based maker of computer hard drives has $3.9-billion in the bank. It’s a far cry from Apple’s cash of almost $100-billion, but at that point we’re comparing apples to oranges.
As usual, you should do your own research before investing in any of these names.