Microsoft, Cisco And Apple: The New Generation Of Dividend Champions

Apr. 23, 2013 7:14 AM ETAAPL, CSCO, KO, MSFT, PG19 Comments
Philip Mause profile picture
Philip Mause

When we think of people, places, things, and institutions, our minds form an image and information which contradicts that image and creates "cognitive dissonance", which is often resolved by the suppression of the new information. But, in the real world, washed up starting pitchers become star relief pitchers, battleships in World War 2 began as queens of their navies and ended as useful anti-aircraft platforms, and bombshell actresses transition into becoming talented character actresses all the time. I love movies which depict a young man's transition into maturity; one of my favorite movie characters of all time is Howard Eppis in The Big Fix, the campus radical on the run who becomes an advertising executive. Thus, "growth stocks" can become "value stocks" and, in today's yield-oriented market, that means they must become reliable sources of dividend yield. The problem is that investors are not movie audiences or sports fans; they insist on "proof" before accepting the fact that a growth stock which has disappointed them can emerge anew as a value stock.

I have put together some very revealing numbers comparing three aging "growth stocks" with two established "dividend champions." The table below provides Friday's closing price, the price earnings ratio based on current year's estimated earnings, current dividend yield, and pay out ratio (dividends as a percent of earnings) for Apple (AAPL), Microsoft (MSFT), Cisco (CSCO), Procter & Gamble (PG) and Coca-Cola (KO). The data is from Yahoo Financial; the current year earnings estimates are based on consensus estimates on Yahoo Financial.

AAPL $390.53 9 2.7% 24%
MSFT $29.76 11 3.1% 33%
CSCO $20.46 10 3.3% 34%
PG $81.43 20 3.0% 60%
KO $42.66 19 2.6% 52%

So far, the analysis suggests that the dividends of AAPL, MSFT, and CSCO are more comfortably supported

This article was written by

Philip Mause profile picture
My name is Phil Mause. I am a lawyer in Washington, D.C., getting close to retirement. I am a yield oriented investor and in the last two years, I have done reasonably well in junk bonds, BDCs, mortgage REITS, and dividend paying blue chip stocks. As an avocation, I dabble in stand up comedy. I have been and continue to be a collaborating author with High Dividend Opportunities, a subscription site based on Seeking Alpha.

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