Although it is not The Dividend Aristocrat I decided to buy Apple. I bought 21 shares at opening at $97.50, which with commission cost me $2068 total. It will increase my yearly gross dividend income by around $48 (but only three dividends will be paid to me in 2016).
Why I bought Apple? Well, probably I will write deeper analysis soon, but to put it briefly:
- Company has lots of money, which will be spend on dividends/buybacks, “the Board has increased its share repurchase authorization to $175 billion from the $140 billion level announced last year” – with current market cap of around $500 billion it is even around 35% (obviously it will not be spend withing one year)
- I guess that Apple is somewhere in the end of product cycle -> there will be new premieres soon and results should increase
- After bad results I have around 7% discount from below results prices. Results were weak, but they were expected to be weak. I think market is overreacting.
- Valuation on P/E, EV/EBITDA is not demanding, Apple is expected to deliver more than $8 EPS, which is P/E < 12, cheap versus market. Moreover if we deduct net cash from valuation it is getting even cheaper. It is valued as no growth company, but in fact in long term I believe I will see a high growth.
- Company is increasing low cost debt -> I think we will see increasing impact on EPS (cheaper external funding than cost of capital – repurchased shares)
- Although share price seems to be higher than in 2012, and seemingly company seems to be cheap, I see that market cap is well below (lower number of shares outstanding), so drawdown calculated for market cap is significantly higher.
- I believe that there will be always new products/new version of current products
- Revenues from services are increasing (these are recurring revenues with high margin)
- Pessimism is strong, this is why share price is so low.
On the other hand short term outlook is rather weak. We will see.