Apple Inc. (AAPL): Pros and Cons of Being an Owner

With the stock price of Apple Inc. (NASDAQ:AAPL) down 25% over the past year (see chart below) shareholders are probably wondering what the future holds? Weighing the pros and cons will help answer the question.

AAPL Total Return Price data by YCharts

Pros

Balance sheet – Apple’s legendary balance sheet sports a cash and investments balance of $137 billion, as of the most recent quarter, with no long-term debt. Its cash balance represents 108% of its stockholders’ equity, exceeding software giant Microsoft Corporation (NASDAQ:MSFT)’s and search-tech conglomerate Google Inc (NASDAQ:GOOG)’s cash to stockholders’ equity ratios of 94% and 77%, respectively.

Growth – Growth for Apple products continue especially on the Pacific Rim. Sales in Apple’s greater China segment grew 67% in its most recent quarter. Its iPhone and iPad sales grew 28% and 22%, respectively. As computing consumption continues to shift away from traditional PCs, the demand for Apple’s iPad and iPhone will continue.

Dividend capability – Apple shows great prudence, much to the chagrin of the investing public, in dividend payment. In the most recent quarter, Apple paid out $2.5 billion in dividends or 12% of its free cash flow. Members of the financial community, such as David Einhorn, manager of Greenlight Capital Re, Ltd. (NASDAQ:GLRE), feel that Apple should pay out some of its $145 per share in cash as a dividend.

Dividend growth – Apple hinted at the prospect of a future dividend hike or paying out a special dividend and it can certainly afford to do so. Bloomberg surveyed analysts who believe that Apple will boost its dividend maybe as early as today, the one-year anniversary of the dividend reinstatement. Apple shows a heavy desire for investing in research. Its research and development expense increased 33% YOY last quarter to $1 billion.

Cons

Product pipeline – With the death of Steve Jobs the investment community at large worries about future product innovation. The $64 billion question: Can Apple overcome market saturation and invent new products to capture consumer imagination? Only the future can tell.