Over the past decade we have had
the opportunity to watch Apple’s share price climb from around ten dollars per
share to heights of over seven hundred. Since Jobs’ passing, Apple has gained
recognition by brand consulting firm Interbrand as the number one brand in the
world; dethroning long-time leader Coca-Cola (NYSE: KO) in the process.
Jobs’ successor, Tim Cook, has
been guiding Apple since 2011 and has yet to launch his defining product. The
world awaits and speculates as to just what the next major driver for Apple’s
growth will be. The “Apple TV” is widely regarded as the next product that will
expand Apple’s ecosystem. Using the Cloud, the Apple TV could potentially send
Apple’s value soaring as it would be something different than just an upgraded
operating system on a new version of the iPhone. It would once again be
something for people to get excited about with Apple.
I view Apple as one of the most
interesting stories in the stock market universe. When Apple initiated its
dividend in 2012, many observers felt this was a statement on the part of the
company that it felt it could no longer grow as effectively as it has in the
past. Initiating a dividend is often viewed as a company throwing up its hands
and accepting that the skyrocketing growth of the past has come to an end. At
the same time, with Apple, there was the issue of +$100 billion in cash sitting
and waiting to be put to work. Investors were growing impatient while Apple
lined its coffers.
Given that Apple has only
recently initiated a dividend policy, it is difficult to determine whether that
policy will be maintained and whether the dividend will be increased in
significant fashion going forward. I typically will not pay much credence to a
company that has not at least demonstrated five to ten years of solid dividend
growth, and this is one of the reasons that leaves me without any shares of
Apple at this juncture. Currently sitting just below five hundred dollars per
share, Apple is yielding in the 2.5% range, which is decent, but not that great
of a lure for me at this point.
I do not consider Apple a
dividend growth stock to buy as an anchor for a portfolio. Apple’s products and
continued business rely on people purchasing more of their products going
forward. Apple relies on a “cool factor” for public approval. Apple depends on
consumers to continue shelling out hundreds of dollars for products that – for
the most part – they “want” but do not necessarily “need”. Without a basic
necessity for people to purchase the products, I can conceivably envision Apple
at some point in the future not being able to maintain a dividend growth
trajectory despite their rock solid financial position at this point in time.
While I have no crystal ball, I
am wary of investing in companies where I have difficulty seeing their future
ten to fifteen years out. I have very little idea of who will be the technology
leader in 2030. As such, I would be uncomfortable putting my investment dollars
to work not just in Apple, but in this industry as a whole.
Full Disclosure: Long KO. No
position in AAPL and no intention to initiate one within the next 72 hours.
