Apple: This Dividend Stock Will Never Run Out Of Cash

Apple (AAPL) has been getting a lot of media attention lately and justifiably so. Driven by iPhone 6 sales that were even stronger than expected, its last quarterly release was the best quarterly release by any public company in history. As is ever, anywhere.

But while plenty of others have written about Apple as a growth powerhouse, I want to focus on Apple as a dividend stock. Apple is a dividend-raising powerhouse and a dividend stock that will never run out of cash—or at least not in the expected lifespan of anyone reading this.

Apple made $18 billion last quarter. To put that in perspective, that’s only slightly smaller than the entire market cap of Twitter (TWTR) or the annual GDP of Honduras. Apple CEO Tim Cook said that Apple sold 30,000 iPhones per hour…every hour of the entire quarter.

Now, I should be clear here: This kind of growth is not something we should expect to repeat. There was a lot of pent-up demand for the larger-screen iPhones, and a lot of would-be sales from future quarters was likely pulled forward. I should also point out that not all of Apple’s news was good. iPad sales continue to disappoint and were actually down 22%. And I’m not expecting Apple Pay or the Apple watch to amount to a lot.

Guess what? None of this matters to me when looking at Apple as a dividend stock. Apple doesn’t have to give us record-breaking earnings every quarter. It simply needs to maintain a competitive position as a consumer electronics maker.  Apple’s balance sheet is strong enough to maintain Apple’s dividend from now until the end of days.

Let’s look at Apple’s cash position. Apple has a cash hoard of $178 billion. If Apple’s cash and marketable securities were a stand-alone company, they would be the 19th biggest company in America by market cap…bigger than Warren Buffett’s Berkshire Hathaway (BRK-A) and just a hair smaller than Coca-Cola (KO).

Most of this cash is sitting offshore, outside of the reach of the U.S. taxman. For this reason, investors have treated it as if it doesn’t exist on the assumption it will never be repatriated.

This is a mistake. The optimist in me believes that U.S. corporations will get some sort of tax amnesty within the next few years. But even if they don’t, and you assume that all of Apple’s cash was taxed at the full 35% corporate tax rate—which is a ridiculously conservative assumption—Apple would still have $116 billion in cash. That’s enough to pay off its existing long-term debts three times over. It would also be enough to continue paying dividends at the current rate for the next 10 years.

Yes, you read that right. Apple could simply break even for the next 10 years, not making a dime of new profit, and it would have enough cash to maintain its dividend.

What would it take for Apple’s dividend to come under threat?

I can tell you that I honestly have no idea. I suppose we could all stop using smartphones tomorrow. Or a nuclear war could take us all back to the Stone Age. Or perhaps the aliens that took Elvis away could come back for the rest of us…or a Walking Deadzombie apocalypse could overrun the company’s headquarters.

In order to find a scenario whereby Apple’s dividend came under threat, you have to dabble in the absurd.

After the recent run-up in Apple’s share price, Apple is not the high yielder it used to be. At current prices, Apple sports a dividend yield of 1.6%. Still, that’s competitive with the 10-year Treasury yield these days. And Apple has been aggressively raising its dividend, due in no small part to prodding by the likes of Carl Icahn and other activist investors. Apple grew its dividend by 9% last year and it’s up 24% since 2012.

Expect more dividend hikes to come.