May 30, 2012

With the incredible success in recent years of the iPhone, iPad, MacBook computers, iTunes, etc. etc., Apple has grown to become the largest company in the world. The price of Apple’s stock has more than doubled over the past two years, from around $250 in mid-2010 to about $580 today. At one point in early April, it reached an all-time high of $644. The company is worth $541 billion, compared to the second-largest U.S. company, Exxon, which is worth $373 billion. Apple has grown to become the largest holding in the S&P 500, and consequently it is the largest holding in the C Fund.

As of close of U.S. stock markets today, Apple makes up just about 4.42% of the S&P 500 index. (Unfortunately, the official site for the S&P index does not break down the percentage holdings on a daily basis, so I referred to data on another fund based on the S&P 500, the iShares’ “IVV” exchange-traded fund, which updates the percentage holdings daily on its site.) Thus, if you have $10,000 invested in the C Fund, you own about $442 worth of Apple, or just under one share of the company. You would need about $13,122 to have one share of Apple at today’s prices.

Importantly for investors, in March Apple announced that it would start paying a dividend of $2.65 a share each quarter starting in mid-2012. This equates to a 1.82% yield, and helps to further increase the dividend yield of the C Fund. This has been a very positive trend, as U.S. companies sit on record amounts of cash. Amazingly, the 1.82% yield that Apple now pays out is greater than the 1.62% yield of the U.S. 10-year bond (and consequently, of interest paid out by the G Fund). Assuming Apple continues to pay out its dividend each year, you will receive a greater cash dividend return than if you buy U.S. government debt.

Here is a list of the top 10 holdings in the S&P 500 (and the C Fund) as of the end of May, 2012:

Company, % of fund:

Apple 4.42%
Exxon Mobile Corp 3.20%
IBM 1.88%
Microsoft 1.83%
GE 1.69%
AT&T 1.67%
Chevron 1.64%
Procter & Gamble 1.43%
Johnson & Johnson 1.42%
Coca-Cola 1.41%

Each of these companies pays out a greater dividend than the U.S. 10-year bond (and the G Fund).

Incidentally, in case you were curious, here are the bottom 10 holdings in the index fund at the end of May 2012, each representing about 0.01% of total holdings in the S&P 500 index. How many do you recognize?

RR Donnelley & Sons
Federated Investors Inc
Lexmark International
DeVry Inc
Washington Post (class B shares)
Kinder Morgan
Titanium Metals Corp
First Solar

See the current top holdings for these funds here.

Related topics: c-fund