Apple (NASDAQ:AAPL) CEO Tim Cook recently made some key announcements during the company’s annual meeting, most notable being that the company remains committed to raising its quarterly dividends and that it aspires to acquire more companies on the cheap. Apple has been announcing its dividend hikes during its FQ2 (calendar Q1) reports, note Apple follows an October to September Financial accounting year. Apple CFO Luca Maestri has promised to continue with this tradition during the current quarter by announcing the company’s new capital returns strategy.

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Since launching its dividend program in 2012 at $1.51, Apple has been pretty consistent with its dividend hikes, raising it by 15.1% in 2013 to $1.74; 7.9% in 2014 to $1.88 and 10.6% in 2015 to the current reading of $2.08, good for 2.2% yield. Most of Apple’s excess cash in the U.S. (the company can only use U.S. cash to returns capital to shareholders) has been going into dividend payments with the rest mainly going into share buybacks. In 2015, Apple spent $11.6B in dividend payouts and another $6.5B for share buybacks.

Apple’s payout ratio (expressed as a % of earnings) currently stands at 22%. That’s a pretty low payout ratio considering that Apple has consistently been growing earnings in double-digits. Many tech companies with contracting earnings including Microsoft (NASDAQ:MSFT) and HP INC (NYSE:HPQ) sport considerably higher payout ratios of 53% and 44%, respectively. So there is still plenty of room for improvement here.

Apple stock is now trading near 52-week lows. The company could, therefore, add considerable shareholder value by buying its own stock at these levels. But judging from Cook’s other comments Apple has another trick up its sleeve.

Apple To Focus More On Mergers and Acquisitions

Apple has never been known to be an acquisitive company; at least not in the same league as a company like Oracle (NYSE:ORCL). Although Apple has bought 19 companies over the past 15 months (some are well known while other acquisitions have slipped under the radar), many are small ticket acquisitions that have hardly caused a dent on the company’s cash pile.

But now, that might change. Tim Cook says that the current bear market presents a fresh opportunity for Apple to make strategic acquisitions on the cheap:

"In times when equity values are falling there's great opportunity to [buy companies]."

A Look At Past Acquisitions Of Apple

Apple did not commit to increasing share buybacks, which leaves us to surmise that the increased M&A activity could come at the expense of buybacks. But just how good is Apple’s track record when it comes to acquisitions? It’s hard to judge that because most of Apple’s purchases are deeply integrated into the company’s ecosystem which makes it hard to quantify their contributions. Perhaps the best-known Apple acquisitions to-date are Siri, the voice control software, and Beats Audio that it bought in 2014 for $3B. Although Apple’s purchase of Beats was widely criticized and even ridiculed, it now appears to have been a pretty strategic acquisition in hindsight. At first, it was generally thought that Apple bought Beats for its headphones business, which made many wonder why Apple decided to take this route seeing that it’s a top-tier hardware company that is well capable of making better headphones than those by Beats. But given that Beats is reputed to have sold 15M-20M headphones from its launch in 2008-2013, and the headphones are reputed to sport very high gross margins, Apple might be able to recoup its investment in just a couple of years.

But apparently Apple was more interested in something a little more subtle than mere headphones. It now appears as if Apple’s main interest when purchasing Beats was to lay its hands on the company’s music streaming business and help it leverage it to build its own music streaming business. Buying an already operational music streaming business might have helped shave off years from the development of Apple Music service, now reputed to have close to 20M subscribers.

Conclusion

In the final analysis, it’s rather difficult to say definitively whether most of Apple’s acquisitions have been a good use of shareholders’ resources. What is undeniable is that Apple’s rationale of scooping up strategic companies when they are 10% or 20% below their fair value does appear to make a lot of sense. Meanwhile, the company’s commitment to continually increasing its dividends should probably be enough to keep investors interested in Apple stock even as they wait for Apple’s next big iPhone launch.