Apple: Take Your Profits Now, Come Back Later

seekingalpha2021-08-02

Summary Dividend Yield Theory is a great indicator of overvalued and undervalued shares for healthy companies. Apple’s current high growth is temporary. Apple is on its way to becoming a dividend ...

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精彩评论

Dawang
2021-08-02
Dawang
Never too late to buy Apple shares 🍎
Mokku
2021-08-02
Mokku
Dnt trick retailers to sell valuable stocks.
天财寻者
2021-08-02
天财寻者
Do have a decent growth profit from this stock. Just wondering to still keep or cash out first (next time buy when dip).
Melvin888
2021-08-02
Melvin888
Disagreed, sell now n will hv to buy much highlater
MrHappy
2021-08-02
MrHappy
Sell?
- JOHY:
  Yes
- JOHY:
  Sell
SSVC
2021-08-02
SSVC
Mmm.. Appreciate your response and comments Thanks
- PJoo:
  Very convincing

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In reality Apple is now a fully grown cash cow, not a young budding calf. The pandemic made many companies transition to the internet faster than they wanted to. That is good for Apple but because it was already a mature business prior to the pandemic it will revert to its normal pre-pandemic growth rates.\nApple’s 5 year average dividend yield from 2016 to 2020 is 1.46% currently the dividend yield on Apple is 0.68%. Apple has been paying a dividend for almost 10 years and the average is also pointing to a yield of ~1.4%. In order for Apple to offer such a yield, share prices would have to move down toward range of $75-$85. Now is the time to take your Apple profits before it reverts to the mean.\nWhy Apple Is Overvalued, Dividend Yield Theory\nDividend Yield Theory was popularized by Investment Quality Trends founder Geraldine Weiss through a book titled Dividends Don’t Lie. The essence of Dividend Yield Theory is that high quality companies tend to have a “normal” yield and as the market falls in love or out of love with the company the dividend yield fluctuates to create buy and sell opportunities.\nSource: Seeking Alphadividend yield\nHere we have Apple’s Dividend Yield History. Looking at the average yield column you can see that Apple’s current average yield is the lowest since Apple first started paying a dividend. This indicates Apple is a screaming sell. On the flip side, the last time Apple’s average yield was above 2% was in 2016. At that time Apple was a screaming buy. Coincidentally that was the same year Berkshire Hathaway (BRK.A) began buying Apple shares.\nThe reason this works is because the dividend yield is a product of the share price. Looking at the chart above you can see the dividend yield shrank from 2016 through 2018 which indicates the share price of Apple increased.\nSource: Yahoo Finance, Apple Share price from 01/01/2016 - 12/31/2018\nThat is exactly what happened. At the peak of 2018 Apple’s dividend yield was 1.28%. At this time, Apple’s 5-year yield average was 1.86%. When 2018 ended Apple’s dividend yield was 1.97%. As you can now see, a company’s dividend yield can be a good proxy for value.\nThis Time Is not different\nI know some of you at this point are thinking, well, Dividend Yield Theory is nice and all but thanks to Covid this time is different. I don’t believe this time is different for Apple and the reason is because of Apple’s maturity as a business prior to the pandemic.\nIt is true that Apple and many other tech companies are benefiting from the pandemic, but Apple has a significant difference from a Shopify, a Zoom, and a Disney Plus. Namely Apple had already largely penetrated its total addressable market. Prior to the pandemic, most of us had never heard of Zoom. We started working from home and needed a solution for remote communication, and bam Zoom capitalizes. Prior to the pandemic, the iPhone was still the smartphone to beat, the smartphone with tens of millions of users, the must-have status symbol in places as far away as China. I spent a semester abroad in China in 2012. During that time, my professors told us how important status symbols are to the Chinese. Students of all ages would not go to school until their parents had bought them an iPhone because without it they would lose “face”. Many could not afford the phone plans and I and my friends witnessed many people having an iPhone just for show. That was in 2012, 8 years before the pandemic.\nSource: Apple Q3 2021*covers Apr – Jun 2021*\nAs we can see, the majority of Apple’s revenue comes from products. Further down products are identified as the iPhone, Mac, iPad, Wearables, Home & Accessories.\n\nAgain the iPhone makes up the majority. The high growth rate in iPhone sales also backs up the theory that this round of growth is due to the Apple super cycle which seems to take place once every 3 years.\nSource: Seeking Alpha Financials, compiled by author\nThe pattern for the last 10 years has been 1 year of stellar growth followed by 2 years of much slower growth. As you can see this results in a 10-year CAGR of ~10% - 13% depending on where we are in the cycle.\nSource: Apple2017 10-K\nHere we see the 2015 super cycle followed by the growth declines in 2016 and 2017.\nSource: Apple2020 10-K\nAgain it happened in the more recent super cycle of 2018 followed by declines in growth for years 2019 and 2020.\nWhen we look into the revenue by product for these periods, we can see that iPhone sales decline and the other categories are unable to make up for the loss of revenue the next year. In the following year, 2017 and 2020, other sources of revenue increased enough for Apple’s total revenue to increase.\n\nPatterns are likely to repeat until something happens to change them. I don't see such a catalyst on the horizon, and currently iPhone sales are again carrying Apple’s revenue to record levels. iPhone sales seem to be selling so well because of the coming transition to 5G and many iPhone owners have a device that is at least 3 years old.\nThe iPhone 12 was unveiled and released in October 2020. This means the super cycle is expected to end with the iPhone 13 which is expected to come out in September or October. I believe this indicates FY 2022 will be a rough year for Apple shareholders.\nApple’s Third And Final Act - A Cash Cow\nInvestors need to pay attention to Apple’s future as a dividend aristocrat. Apple is transitioning toward more service based revenues. This is a higher margin business but there is less explosive innovation, meaning growth will decline.\nAt the current share price, investors are “locking in” a targeted return of 9% over the next 10 years based on some optimistic assumptions.\n\nGrowth of 19.3% for the first 5 years followed by 12% growth for the second five years.\nAn expected dividend growth rate of 17.5%\nApple reverts to their historic P/E of 21.\n\nAll of that together means Apple’s share price in 10 years will be $293.47 and the dividend will be at $4.43 a share giving existing shareholders a yield of 1.5% which is much closer to their current 5-year average yield.\nApple’s dividend payout ratio is currently 15.86%. Other companies in the IT sector like Texas Instruments (TXN), and Intuit (INTU) have a payout ratio of 51% and 25% respectively which shows Apple’s dividends will be much higher in the coming years. With a projected EPS of $14 in 2031 a 51% payout would mean a dividend of $7/sh.\nRisk and Opportunity, The Dividend increase\nBased on the 5 year average dividend yield and the current rate of dividend increases, it is likely the dividend will be increased to $1.03-$1.14. In order for Apple to maintain its historic yield at the projected future dividend, Apple shares would have to trade around $80. it is possible that Apple pays up and raises their dividend to $1.89. Apple spent $14 billion on their dividend in 2020 and raising it to $1.89 will increase the price tag to $31 billion. This would increase their payout ratio to 34% which is a typical payout ratio for cash cow companies.\nThe expected dividend I project is based on the percentage of operating cash flow the dividend takes up. Over the last 3 years, it has ranged from 15% to 18%. I used an estimated $100.15 billion for operating cash flows and at 19% you get the $1.14 dividend.\nSource: Seeking AlphaCash Flow Statement\nLastly it is possible that a dividend yield of less than 1% becomes the norm for Apple. If the current 2021 yield average of 0.63% becomes the new normal, Apple’s share price should rise to $163.49 - $180.95 based on my projected dividend increase.\nConclusion\nSell Apple, take your profits now. The super cycle will end. Come back later and buy Apple at a discount when the dividend yield is higher.","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":804033629,"gmtCreate":1627911465161,"gmtModify":1631888876184,"author":{"id":"3579482809178950","authorId":"3579482809178950","name":"Dawang","avatar":"https://static.tigerbbs.com/d0f01f2346125f600328ffd48beb3a4c","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3579482809178950","authorIdStr":"3579482809178950"},"htmlText":"Never too late to buy Apple shares 🍎","listText":"Never too late to buy Apple shares 🍎","text":"Never too late to buy Apple shares 🍎","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/804033629","repostId":1130492644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":805263930,"gmtCreate":1627884262720,"gmtModify":1631891074153,"author":{"id":"3565436016441263","authorId":"3565436016441263","name":"Mokku","avatar":"https://static.tigerbbs.com/9e4e094f64e75e5e8f16841e19e65316","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3565436016441263","authorIdStr":"3565436016441263"},"htmlText":"Dnt trick retailers to sell valuable stocks.&nbsp;","listText":"Dnt trick retailers to sell valuable stocks.&nbsp;","text":"Dnt trick retailers to sell valuable stocks.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/805263930","repostId":1130492644,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":805827361,"gmtCreate":1627871194353,"gmtModify":1631883986207,"author":{"id":"3582251507094110","authorId":"3582251507094110","name":"天财寻者","avatar":"https://static.tigerbbs.com/0a116dd3fd41662cd330b47aee6b7082","vip":1,"crmLevel":6,"crmLevelSwitch":0,"idStr":"3582251507094110","authorIdStr":"3582251507094110"},"htmlText":"Do have a decent growth profit from this stock. Just wondering to still keep or cash out first (next time buy when dip).","listText":"Do have a decent growth profit from this stock. Just wondering to still keep or cash out first (next time buy when dip).","text":"Do have a decent growth profit from this stock. Just wondering to still keep or cash out first (next time buy when dip).","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/805827361","repostId":1130492644,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":805868865,"gmtCreate":1627870351457,"gmtModify":1633755757768,"author":{"id":"3577938728188071","authorId":"3577938728188071","name":"Melvin888","avatar":"https://static.tigerbbs.com/1f7e36200d6d8c6159f6d35c041d8e3e","vip":1,"crmLevel":5,"crmLevelSwitch":0,"idStr":"3577938728188071","authorIdStr":"3577938728188071"},"htmlText":"Disagreed, sell now n will hv to buy much highlater","listText":"Disagreed, sell now n will hv to buy much highlater","text":"Disagreed, sell now n will hv to buy much highlater","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://laohu8.com/post/805868865","repostId":1130492644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":805869894,"gmtCreate":1627870227218,"gmtModify":1631891627376,"author":{"id":"3576627310629871","authorId":"3576627310629871","name":"MrHappy","avatar":"https://static.tigerbbs.com/db25aeb48bc88043744fb93a4c4c3be2","vip":1,"crmLevel":4,"crmLevelSwitch":0,"idStr":"3576627310629871","authorIdStr":"3576627310629871"},"htmlText":"Sell?","listText":"Sell?","text":"Sell?","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":2,"repostSize":0,"link":"https://laohu8.com/post/805869894","repostId":1130492644,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5415814,"gmtCreate":1628001399209,"gmtModify":1631891627399,"authorId":3579331938591706,"author":{"id":3579331938591706,"idStr":"3579331938591706","authorId":3579331938591706,"name":"JOHY","avatar":"https://static.tigerbbs.com/01faff4217bc5e19fd6b5d62c156f678","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":805869894,"type":1,"supId":0,"prevId":0,"content":"Yes","text":"Yes","html":"Yes"},{"id":5403859,"gmtCreate":1627910945780,"gmtModify":1631891627380,"authorId":3579331938591706,"author":{"id":3579331938591706,"idStr":"3579331938591706","authorId":3579331938591706,"name":"JOHY","avatar":"https://static.tigerbbs.com/01faff4217bc5e19fd6b5d62c156f678","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":805869894,"type":1,"supId":0,"prevId":0,"content":"Sell","text":"Sell","html":"Sell"}],"langContent":"EN"},{"id":805881905,"gmtCreate":1627869836407,"gmtModify":1633755765975,"author":{"id":"3574906731000207","authorId":"3574906731000207","name":"SSVC","avatar":"https://static.tigerbbs.com/545a5ea462ff4ac7cc100bd3d8d97f72","vip":1,"crmLevel":3,"crmLevelSwitch":0,"idStr":"3574906731000207","authorIdStr":"3574906731000207"},"htmlText":"Mmm.. Appreciate your response and comments Thanks&nbsp;","listText":"Mmm.. Appreciate your response and comments Thanks&nbsp;","text":"Mmm.. Appreciate your response and comments Thanks","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":1,"repostSize":0,"link":"https://laohu8.com/post/805881905","repostId":1130492644,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"comments":[{"id":5402661,"gmtCreate":1627900992981,"gmtModify":1635162024314,"authorId":3572863479502236,"author":{"id":3572863479502236,"idStr":"3572863479502236","authorId":3572863479502236,"name":"PJoo","avatar":"https://static.tigerbbs.com/c1df329f4341646fc633446858d34c31","vip":1,"crmLevel":4,"crmLevelSwitch":0,"individualDisplayBadges":[]},"repliedAuthorId":0,"objectId":805881905,"type":1,"supId":0,"prevId":0,"content":"Very convincing","text":"Very convincing","html":"Very convincing"}],"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":94,"commentSize":24,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":false,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"laohu8","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1130492644"}