Apple trades at $355 with a $5.1 trillion market cap. In this week’s Dividend Live, I walk through the business, the moat, growth, management, and risk, then get to the question that matters: is it worth that price?
The short version: by my numbers, no. Apple trades at 39.6 times earnings, against its own five-year median of 31.2 and the S&P 500 at 25.9. A reverse DCF says that to justify $355, Apple needs to grow revenue about 16.7% a year in years four through ten. Over the last three to five years it has grown closer to 7%. I put fair value near $280.
That doesn’t make Apple a bad business. Margins are excellent, return on invested capital is above 55%, and the share count is down 12.7% in five years. Dividends plus buybacks give you a shareholder yield of about 3.2%. But with a 0.3% dividend yield growing around 4.5% a year, Apple doesn’t fit cleanly as either an income stock or a dividend growth stock.
In the Q&A we get into yield on cost, why Mastercard can out-earn Verizon on income over time, required minimum distributions, and how to blend dividend growth with high yield as you get closer to retirement.
This is educational content, not investment advice.
Chapters
0:00 Is Apple worth $355? The quick snapshot
2:41 What Apple sells and where the revenue comes from
6:56 Phase four: capital return
8:06 The moat: thin or narrow?
12:38 Growth: why I give it a 2
15:01 Management and the new CEO
17:44 Risk: China, the App Store, and AI
23:03 Valuation: P/E and price to free cash flow
26:18 Reverse DCF: what $355 requires
28:58 Dividends and buybacks
30:11 Q&A: measuring dividend growth and yield on cost
35:23 Where Apple fits in a dividend portfolio
36:22 Retirement planning: RMDs, Roth vs. traditional IRA
41:16 Blending dividend growth with high yield
46:46 Wrap-up and next week