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There Are 78 Million Reasons to Love Apple

Last week, Apple (NYSE: AAPL) reported its first quarter earnings. The tech giant beat expectations on all ends, causing its share price to surge over 3% after the report. Earnings totaled $3.36 per share, compared to analysts’ view of $3.21. Revenue came in at $78.4 billion, above analysts’ estimate of $77.25 billion.

What is even more impressive about Apple is that it continues to beat its own records with the iPhone. When a new iPhone is released, consumers have remained loyal and enthusiastic about the new features. Apple sold 78 million of the iPhone 7 since its release in September. That compares to 76 million that analysts expected and up 5% from the same period, a year ago. The continued growth is partially fueled by high demand for the larger models (the iPhone 7 Plus). In addition, Apple reported that it saw its best quarter ever for its iWatch.

It is also notable to mention that this year, the iPhone officially turns ten years old. Back in 2007, many consumers were skeptical (and excited, too) about the unknown technology. Today, the iPhone, as well as its competitors, have become a part of our everyday society. It is expected by 2020, 70% of the world’s population will own a smartphone.

As for its dividend, Apple has a yield of approximately 1.75%. While this may not be too exciting for dividend investors, the company only recently started paying a dividend again. Apple halted its dividend payout in 1995 when it ran into financial trouble. It is typical of young technology companies to invest in innovation rather than pay shareholders dividends. During this financial crisis, Apple actually had to be rescued by Microsoft (NYSE: MSFT) when it was low on cash. Ironically, Apple is the most cash-healthy company today. The company has a cash hoard of $246 billion (yes, billion). That’s more than enough extra cash to buy both Intel (NASDAQ: INTC) and Tesla (NASDAQ: TSLA) outright at their current market values. The majority of this cash is currently overseas, but Apple’s CEO, Tim Cook, expressed optimism about the tax reform under the Trump administration.

Some investors wonder why Apple has all of that cash, yet only pays a 1.75% yield. While the company can certainly afford to throw a little more cash at shareholders, it has been boosting its dividend by an average of 10% per year since it was reinitiated.  Plus, it’s unlikely that with $246 billion in cash and 78 million iPhones sold in one quarter, that Apple will cut its dividend. Investors can expect to see another dividend hike in September.

Apple’s share performance tells another story in favor of the tech giant.In the last twelve months, the stock is up nearly 40%, compared S&P 500 performance of 22%. Below is the 10 year chart of Apple, versus the S&P 500. Apple is up over 975% in the same period where the index is up 58%.


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