Recent Buy – Apple Inc (AAPL)

Apple

I initiated a very small starter position in Apple Inc (AAPL). This might come as a surprise for some of the dividend growth investors, but the company has changed a lot in the last couple of years.

Over the past couple of decades, the company has remained growth focused and has made a lot of money for investors and traders. But I, as a dividend growth investor, was not interested due to the lack of dividends – let alone the growth of dividends. Things started changing in the summer of 2012 when Apple declared that it will start paying out dividends. While this was seen as a shift from growth to value play for investors, some headed for the exit door and the stock suffered with a fall of over over 40% from its peak. However, over the course of last two years, it has become clear that the company is not stagnant and resting on old accords – the company still maintains the drive to innovate and push forward with new products and services.

Financials

Apple Financials

Recent Buy Decision

  • Apple has tremendous pace of innovation that continues to capture the imagination of the masses. New product launches keep coming such as new iPhones, iPads, iMacs, iWatch and launch of new services as well – such as Apple Pay. Other growth opportunities include Apple CarPlay, where the Apple ecosystem is deployed in the car console systems, where Apple has already signed up with a number of luxury and mid-tier car manufacturers.
  • They have been able to command higher prices and the customers are happy to pay for it. Moreover, the brand loyalty is spectacular with some reports claiming upto 90%.
  • Lots of new frontiers still exist for Apple to take a crack at – such as health, television, media etc.
  • Apple has come of age and has become a more mature company and the dividends have started flowing to shareholders. Apple is also becoming more shareholder friendly – even listening to activist investors like Carl Icahn and tweaking their buyback plans.
  • Apple having only started issuing dividends in 2012 started raising them out of the gate. The dividend grew by 15% in 2013 and 8% in 2014. The current payout ratio is a low 30% and considering the huge cash position that Apple holds (albeit overseas), increasing those dividends in the future should not be a problem.
  • The valuation is attractive with a low P/E of 15.7, PEG of 1.29 , the company is a proven cash machine. According to my analysis, the fair value is around $140, although investors like Icahn have claimed that the Apple stock is worth $200 last week.

Summary of the stock

  • Symbol: AAPL
  • Quote: $97.67
  • 52-week range: $70.51-$103.74
  • P/E: 15.78
  • Forward P/E: 13.34
  • Debt/Equity: 25.67
  • Yield: 1.88%

 

20 thoughts on “Recent Buy – Apple Inc (AAPL)

  1. R2R,

    interesting buy. Looking at myself and some friends of mine the part about consumer loyalty is definitely true. However, the huge size of this company is making me wonder if they can continue to sell that many iPhones for years to come.

    I wish you good luck with that company, next year I’ll think about joining you as a fellow shareholder. For now I will stick to my watch list.

    • Thanks for stopping by and the input, GI.
      I know where you are coming from. I have had the same thought over the years and have stayed away from it. I think its a great company to be a customer of, but shareholder – I wasnt so sure. Even now, Apple relies heavily on the device sales for the revenue growth – and I think that will continue for a couple of more years but Apple might have to turn elsewhere for long term growth – and I think thats where media and services come in.

      regards
      R2R

      • Apple is the master at establishing a new product category and pushing it to new heights. Smartphones and tablets were not popular before the iPhone and iPad came along, and they have so many loyal followers that the Apple watch can be the next product to take off.

        It also looks like they have no problem increasing the sales of their iPhones. Just look at the lineup of people on launch day!

        • True, Brian.
          Also it is important to remember that they have a great trade-in program where old iPhones are swapped for the new ones. This keeps the customers happy with a shiny new toy for another couple of years and keeps them in the ecosystem.

          regards

  2. I’m long APPL. I think the company will continue to grow. I see more and more people switching to iPhone 6 from Android since the announcement. That’s a good sign!

    • Yes, you are right about that…Ive always stayed away from Apple products as they lock you in and interoperability is not their highest priority and even I have started to sway towards getting an iPhone now. My current contract expires next summer, so I might consider switching to iPhone just for a fresh change. But my wife just bought an iPhone 6 last week – and it is one sweet device. Love it.

      R2R

  3. Congrats on a good buy! I recently bought shares myself, and then increased my position when the price went lower. I’ve used Apple computers forever and had an iPod, but that was it. Other people though are just crazy about Apple products and one thing you can count on is their innovation and style. I think they will continue to grow, especially once the iWatch is released. Glad to have you as a fellow shareholder!

    – HMB

    • Good call on adding when the price went down. I didnt have a lot of cash, so I invested a very small starter amount – I will be looking to invest more in the future if I find weaknesses. Yeah Ive only owned one product so far: the first generation iPad, but my wife just bought a iPhone 6 and I love it. Im thinking of switching to iPhones next year as well.

      Best wishes
      R2R

  4. Smart man. I’ve written a couple of articles on how Apple is now a dividend growth company and value investors are moving in. Do yourself a favor and continue to accumulate this little gem. It’ll continue to grow its dividend and it’ll continue to increase in price. Congratulation.
    Respectfully,
    Dennis McCain
    dennismccain.weebly.com

    • Thanks Dennis. Apple sure has surprised people by becoming a dividend growth stock right out of the gate. I will be looking forward to accumulate this gem and will be holding it for a long time.
      Thanks for stopping by and the comment.

      Have a great day
      R2R

  5. I’ve never owned an iPhone, but after playing with an iPhone 6, I’ve been quite tempted to switch to Apple for my next phone.

    I’m building a small position through Loyal3 myself. Good buy!

  6. R2R,

    Welcome to the AAPL shareholder club! I bought 10 shares pre-split earlier this year for $550 a share after much deliberation, and now own 70 shares post-split.

    AAPL often gets dogged for its lack of new products/innovation post-Steve Jobs, but in my opinion, cell phones are here to stay for the foreseeable future and I don’t see anyone knocking AAPL off the podium anytime soon, especially after the iPhone 6 reception. There’s plenty of room for the dividend to grow moving forward and I wanted to make sure I had a small slice. I’d even put DIS and SBUX into the same category when looking at dividend growth potential and consumer loyalty over the next 5-10 years, though to a lesser extent.

    Best,

    DWC

    • Looks like you got some good entry points into the AAPL stock. Apple’s innovation is not slowing whatsoever and people’s concern after Steve Jobs’ death are unfounded. While he was a great leader, he was not the only person working for Apple – they have a great team and their products speak for themselves. You are spot on with your targets for brand loyalty – SBUX and DIS have been on my watchlist for a while, but not enough capital to deploy.
      Thanks for stopping by and the comment, DWC. Congrats on launching the new blog, I’ll be sure to follow along.

      Best wishes
      R2R

  7. RM2R,

    Always interesting to see the reasons investors pick Apple. I like your approach in that it makes more sense now for a dividend investor to own them – growth in dividend is there (though small history), a tad higher yield than they used to have, buy backs is high and innovation within the company is still high with unknown territories they haven’t explored yet as you mentioned. Nice job and I hope it works out amazing for you!

    -Lanny

    • Thanks Lanny. I think Apple still has a lot of room to grow even though people just think that it cant grow after already being one of the largest companies in the world. Dividends might continue to grow at a slower pace until they figure a way to bring the overseas cash back to US without much of a tax hit – if they do, then its a bonanza for the shareholders.

      Have a great weekend
      R2R

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