Apple is one of the leading technology companies in the world. It manufactures and markets smartphones, personal computers, tablets, wearables, and accessories. The company is known for its impressive range of MacBooks, iPhones, iPads, etc. Apple products are popular among consumers given their sophisticated design and high brand value.
Apple has a huge global presence. International sales accounted for 61% of the latest quarter’s revenue. The company’s active base of installed devices has grown to over 1.5 billion. Apple’s four software platforms iOS, macOS, watchOS, and tvOS provide a seamless experience across all Apple devices. Its breakthrough services include the App Store, Apple Music, Apple Pay and iCloud. By category, iPhone is the largest, accounting for 55% of total 2019 sales, followed by Mac (10%), iPad (8%), wearables, home and accessories (9%) and services (18%). The company sells its products through its retail and online stores and direct sales force. During 2019, Apple’s net sales through its direct and indirect distribution channels accounted for 31% and 69%, respectively, of total net sales. In addition, a majority of the company’s supply chain, and its manufacturing and assembly activities, are located outside the U.S.
The company holds a broad collection of intellectual property rights related to its hardware devices, accessories, software and services.
- Opportunity Score: 50
- Ticker: NASDAQ:AAPL
- Sector: Technology
- Industry: Consumer Electronics
- Market Cap: 1852.32B
- P/E: 32.48
- Dividend Yield: 0.77%
- Payout Ratio (Earnings): 24.92%
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 6/10
- Dividend Income Fit: 5/10
Revenue Growth & Market Exposure
Apple’s customer stickiness is very high. The company’s customers include individual consumers, small and mid-sized businesses, education, enterprise, and government markets. It is said that once an Apple customer is always an Apple customer. Apple’s application interface and ease of use do not allow its customers to switch brands. Other than the mainstream MacBooks, iPhones, iPads, Apple’s other consumer accessories and wearables like Apple Watch, AirPods, headphones, and speakers are quite popular as well. Though the iPhone remains its huge revenue generator, Apple is successfully generating sustained growth in its wearables, Home, and accessories segment. The company offers superior innovation and integration of the entire solution, including hardware, software, and services. Customer satisfaction and loyalty are Apple’s huge competitive advantages, which entails premium pricing for Apple’s products.
Other than its massive range of consumer products, Apple also provides services like digital content stores and streaming services, AppleCare, iCloud, and licensing. The company operates various platforms that allow customers to download applications and digital content, such as books, music, video, games, and podcasts. It also offers subscription-based digital content streaming services, including Apple Music and Apple TV.
Apple’s revenues have grown at a rate of 20% CAGR in the last decade. A growing number of company-owned retail stores are located in high traffic locations ensuring easy access for a high-end clientele. Apple’s strategy is to continue developing great innovative products. It spends a substantial amount on marketing and R&D activities, which fortifies its strong leadership position in the technology industry. A 5G iPhone which is expected to be launched this year should potentially boost Apple’s revenues.
Apple Inc. is a Dividend Starter and has been paying dividends since 1987. It has a dividend yield of 0.95% and a low payout ratio of 24% which indicates enough room for future expansion. The company has been growing dividends at an impressive rate of 10%+ CAGR over the last five years.
Apple Inc. is a great dividend growth stock. It last raised its dividend by 13%. The company generates huge amounts of cash flow which has been increasing almost every year over the last decade. It has compounded its earnings at a rate of 28% CAGR over the last decade. Apple has a sound history of delivering shareholder returns. The company is targeting to reach a net cash neutral position over time. In April 2019, Apple announced an increase to its current share repurchase program authorization from $100 billion to $175 billion.
Apple is the world’s most valuable company with high brand recall. Its customer base is not only loyal and diversified but is also growing. Apple’s diversified and innovative product portfolio has buyers from all walks of life and also generates massive cash flows for the company. Apple has a matured business and is already an established player; it does not require a lot of cash for recurring capital investment making it a good cash generator. Even if Apple maintains its reasonable payout ratio of 24%, it could easily fund its dividend growth out of its ample cash generation.
The markets for Apple’s products and services are highly competitive. The company is focused on expanding its market opportunities related to smartphones, personal computers, tablets, and other electronic devices. Apple’s range of products is known for its excellent quality and is regarded as a sort status symbol for its owners. This helps the company earn a substantial premium over the competition. Apple competes heavily with other leading smartphone companies like Samsung, Xiaomi, Huawei, LG, Nokia, etc.
Increasing demand for unique technology products positions Apple well to remain at the forefront of the industry. Given a low payout ratio and Apple’s leadership position globally, the company should continue its double-digit dividend growth pace going forward.
Apple’s goal is to have an impact on health and it’s an untapped market. iPhones are just how it funds research for future growth when you get to make more money as an investor.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.