Apple Stock Review Analysis | Why $AAPL Will Continue To Dominate For Decades
In the first section of the video i’ll run through what the company does and how they make money, then i’ll look at some of the numbers and metrics that i find useful in evaluating companies as well as looking at the dividend, history and the company’s revenue net Income and cash flow and finally i’ll offer my own individual thoughts and opinions on the stock. My personal goal is to create a dividend portfolio that provides me with a passive income. For me, stock analysis for my goals comes down to two points: does the company have a history of paying reliable and growing dividends, and can the company continue to make profits and therefore pay dividends for decades to come so who are apple and how does their business Operate apple designs, manufactures and markets, smartphones, personal computers, tablets, electronic wearables and accessories, and also sells a variety of related services. The major physical products in their portfolio are the iphone the mac, the ipad airpods and the apple watch. The iphone is the company’s line of smartphones based on its ios operating system. Apple has around 21 of the smartphone market share by revenue, and this makes it the best selling smartphone in the world. So nearly one in five of every smartphone on the planet is an iphone and they sold around 200 million units during 2020.. The mac is apple’s line of personal computers based on its mac os operating system. Microsoft windows is the most popular operating system worldwide, so apple only have a nine percent share of the personal computer market.
The ipad is the company’s line of touch screen. Tablets and apple has around 37 of the total tablet market share by revenue, which again makes the ipad the most popular tablet in the world. So nearly two out of every five tablet purchases are from apple and they sold around 60 million units worldwide over 2020. The apple watch is the company’s line of smart watches. Again, apple are the market leader, with around 40 total share of the market by revenue, clearly making them the most popular smartwatch on the market. Airpods are the company’s wireless headphones and are compatible with the iphone ipad, mac and apple watch. Apple dominated the competition again in 2020. Holding a 25 market share apple also offer a variety of services and software products. The company’s cloud services apple icloud store and keep customers content up to date and available across multiple apple devices and windows. Pcs apple gives five gigabytes of storage to all customers for free, but they also offer paid plans which gives users additional storage for a monthly cost. Apple also operates various platforms, including the app store that allow customers to discover and download phone applications and digital content such as books, music, video games and podcasts apple also offers digital content through subscription based services, including apple music, which is a music and video streaming service. And apple tv, which is a streaming service that offers exclusive original tv content as of the end of 2020 apple music had 72 million subscribers for comparison, amazon, music had 55 million and spotify had 138 million, so they’ve still got some way to go to catch spotify.
Although they do still command a sizeable market share, as of the end of 2020 apple tv had 10 million subscribers, which is some way short of disney plus 95 million amazon. Prime videos, 150 million and netflix way out in front with 204 million apple also offers apple. Pay, which is a cashless payment service that can be made through an iphone or apple watch, there’s no fee to the customer, but there is a fee to the vendor. If we now have a look at how the revenue for each of these segments compare, we can see that apple’s main source of revenue is from iphone sales. In fact, iphone sales count for more revenue than all of the other segments combined, maybe a little surprisingly. The next largest source of revenue is from their services, so the app store apple, music, apple, tv, etc. Then we have wearables the mac and the ipad making up the rest. The industry, in which apple competes is characterized by rapid technological advances, and so the company’s ability to compete successfully depends heavily upon its ability to ensure a continual and timely flow of competitive products. Services and technologies to the marketplace apple continues to develop new technologies and to enhance existing products and services and to expand its product range through research and development, licensing of intellectual property and acquisition of third party businesses and technology. We can see from this graph that apple have really ramped up their spending on research and development, going from under one billion dollars in 2010 to nearly 12 billion dollars in 2020.
This is only a good thing in my opinion and will hopefully help apple to stay at the forefront of innovation for decades to come. Let’S now take a look through the numbers that i find useful in evaluating stocks apple has a current dividend: yield of 0.62 last year’s dividend yield averaged at 0.64 percent, so there is a slight decrease in yield, but this is mainly due to the recent price appreciation Where apple stock has gone from around 120 to its current price of 132.99 in just under a month, the yield is currently much lower than it has been historically but again, that’s, just because capital gains have exceeded dividend growth and also because the company’s dividend history is Extremely short and likely has a lot of room to grow, speaking of which apple only restarted their dividend payments nine years ago, but have increased the dividend consecutively every year. Ever since i’ll discuss this in more detail later on in the video over the past five years. The average dividend per share growth rate was 10.4 percent per year, which is a really nice amount and something that i hope can continue. The payout ratio is currently 21.77. This just shows the proportion of earnings a company pays shareholders in dividends and is expressed as a percentage of the company’s total earnings, the lower the percentage, the better and i tend to consider around 80 as being a high ratio. So 21 is incredible and if we look at the payout ratio history since dividends restarted, we can see that the payout ratio has been very consistent.
The average ratio over this period is 23, which i feel gives a dividend so much room to grow in the future. The market cap of apple is 2.13 trillion dollars, which makes it the largest company in the world by market cap. Personally, i hold a lot of these large blue chip companies in my dividend, portfolio as they tend to be established, secure businesses, and i feel that they’re less risky than smaller cap companies and new startups apple has a share price of 132.99, and this puts it towards The higher end of the 52 week price range, the 52 week. Low price of 65.31 was from march 2020 when the whole market crashed, but apple’s stock price has actually doubled. Since then, the current price does seem to be a little high when you compare it to the 50 day average of 123.46 and the 200 day average of 123.51. So now let’s look at the yearly dividend. History of the company apple first started paying dividends in 1987.. These were very small amounts and started at a quarterly dividend of six cents and ended at 12 cents in 1995.. It was during this year in 1995 that apple stopped paying dividends. Some people might not know this, but apple was actually facing some significant headwinds early on within their company. They were trying to compete against already established competitors and they were really strapped for cash when you think about it. Apple really was a true disrupter moving the world from cds to mp3s and anytime that you have a company like that it’s going to take significant funding from the company so paying out a dividend was just not feasible at the time, but by 2012 and after steve Jobs had passed, the reins onto tim cook, apple re, initiated its dividend and they’ve paid a dividend ever since.
So we can see an obvious upward trend since 2012, which is pleasing to see as a dividend investor. In fact, since 2013 dividends have nearly doubled from 42 cents to 81 cents in 2020., i just want to address the dividend yield, as some people might think that a yield of 0.62 isn’t worth it after all, we’d only be getting 62 cents for every 100 invested, But i want to focus on the potential yield on cost. The average dividend increase since dividends were reinstated is 10 per year. We do need to remember that past performance isn’t always indicative of future performance, but if apple were to carry on this rate of dividend increase, we could build an attractive yield on cost. This graph shows what the dividend payment could become if it carries on growing at 10 per year, so we can see that it could develop into quite a nice amount and now, looking at this graph, assuming that we bought one share right now for 130, we can See what our yield on cost could become in the future again, i just want to reiterate that past performance isn’t a guarantee of future performance, but this is a strategy i employ for my investments and i’m always looking to target companies with a growing dividend to build A nice yield on cost businesses that can consistently pay dividends and also increase them over the years can produce a considerable cash flow for shareholders over the long term.
Now let’s have a look at the chart showing apple’s revenue, cash flow and net income. Well, it’s always useful to look at the dividend: history of a company. I think it’s also important to look at the company’s money. Making ability, as the revenue and income of the company are key to future dividend payments. The amounts in this graph just blow my mind. The numbers are phenomenal: we can see an upward trend in revenue which is currently pushing the 300 billion dollar mark. This is extremely pleasing for me, as an investor, as it shows a continued and increasing demand for their products again. We can also see a slight upward trend in net income, which is currently pushing the 63 billion mark. This is again really desirable for me as a dividend investor as it’s the net income, that the company will pay dividends from so to see it increasing means that there should hopefully be scoped to continue increasing the dividend. If we also look at the profit margin of apple, we see a similar theme in terms of some more excellent numbers with an average profit margin of 22 percent. Profit margins can vary from industry to industry and size of business, but for context. A 20 margin is generally considered good 10 average and 5 percent low, so for apple to be averaging 22 again reinforces the strength of the company’s fundamentals i like to see. Companies have a consistent profit margin, as it exhibits good control of their expenses by the management.
The cash flow has also been slowly increasing too, and is currently approaching the 80 billion dollar mark. This is just extraordinary for a company to generate this kind of cash flow again. This is so pleasing for me, as an investor, as a company that can generate positive cash flows, is more likely to be able to provide a return for shareholders, either through being able to reinvest the cash into growing the business or to use the cash to pay Out dividends, as you can see, apple is a cash generating colossus, and if we now take a look at how much cash apple had in their accounts at the end of each financial year, we can see that they’ve been steadily building up their cash reserves. With the last count being at around 90 billion dollars, i think this is really important regarding the dividend, as there could be a point where apple have so much cash that they just don’t know what to do with it, and this could be returned to shareholders in The form of dividend growth, so what is my opinion on apple right now? I own a few long term dividend stocks that are my forever holds. These are stocks that i never intend on selling. If i plan on holding a company forever, i only care for companies that are industry leaders able to generate strong cash flow even in difficult economic times, have a robust balance sheet and have growing dividends.
Apple has all of these things and more. It could be argued that apple are maybe the best tech stock on the market, which is why i strongly believe that apple stock would make a great addition to a dividend: growth portfolio. I just find it hard to ignore apple when they’re pulling the types of numbers. I’Ve discussed in videos so far they’re, just an absolute giant of a company people might look at industry leaders from the past that aren’t around anymore as a warning to apple, especially in the phone industry, for example. Nokia, htc and blackberry have all held considerable market share. In the past, however, i feel like apple are just so much more than just a phone company. Their range of computers, ipads, wearables and services all make up an incredible collection of extremely desirable products and with their heavy expenditure into research and development, driving new and improved models each year, it’s hard to back against them. Continuing this dominance in the future. I currently hold 10 shares of apple and plan to keep on purchasing in the future if it ever dips below 120 again anytime soon, as it did at the end of march i’ll, look to load up as much as i can. I see this company as a long term hold and i’m hopeful of building a nice yield on cost in the future. As i discussed earlier, this isn’t investment advice and you should always do your own research and due diligence before making any stock purchases.
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