Apple (NASDAQ:AAPL) is a marquee, if not the largest holding in a slew of exchange trade funds, including a number of ETFs tracking the Nasdaq-100 Index (NDX) or derivatives of that widely followed benchmark.
The Invesco ESG NASDAQ100 ETF (QQMG) is part of that group. QQMG follows the Nasdaq-100 ESG Index — the environmental, social, and governance (ESG) counterpart to NDX. QQMG’s large exposure to Apple is relevant over the near term because with the iPhone maker’s earnings report looming, it’s widely expected that the company will unveil another massive share repurchase program and a sizable dividend increase.
In a note published on Tuesday, Citigroup analyst Jim Suva forecast that Apple will announce a new share repurchase program of $80 billion to $90 billion and that it will reveal a dividend hike of 5% to 10%. When it reported earnings in April 2021, California-based Apple announced a buyback of $90 billion and a dividend increase of 7%.
Should the iPad maker follow that precedent, it would be material to QQMG investors because the Invesco fund allocates 13.57% of its weight to Apple, making the stock the ETF’s largest holding.
Obviously, dividend growth and buybacks are nice, but investors need to ensure that a company engaging in those shareholder rewards has the balance sheet to support those efforts. With cash on hand of more than $200 billion, Apple sure does.
“Stock buybacks have proven successful for corporate executives and shareholders alike. Investors get more return from their invested capital, and corporations benefit from increasing stock prices. Tech companies like Apple can use excess cash this way, or they can invest the surplus in acquisitions, R&D, or increasing wages,” reports Jeff Butts for The Mac Observer. “Apple does some of all of that. The company has a long history of stock repurchasing, and many investors will welcome the boost to that program. The increased dividends, too, will prove attractive.”
Apple isn’t the only shareholder rewards selling point with QQMG. The ETF allocates 60% of its weight to the technology sector, which is home to some of the most cash-rich companies in the U.S., and plenty of those firms are dedicated buyers of their own shares. While not all of QQMG’s 95 holdings are dividend-payers, those that are, including Apple, have rapidly grown payouts in recent years. That’s saying something when considering that 63% of QQMG’s member firms are large-cap growth stocks.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.