With Apple Inc. (NASDAQ:AAPL)
pessimism near an all-time high and it's stock trading irrationally low relative to its fundamental earning power, I'm betting big on Apple. Here's why.
Apple is a cash cow
The company's dividend yield may not be meaningfully large today, at 2.7%, but I can say with near certainty that the Cupertino-based tech giant will continue to boost its dividend for years to come. Currently, the company is paying out just 27% of its annual earnings in dividends. This leaves quite a bit of room for the company to boost its dividend in the future.
Then there's Apple Inc. (NASDAQ:AAPL)'s massive cash hoard. Once a topic of criticism, the cash is now a fully loaded weapon. Enabled by the world's largest share repurchase program
, the company is buying back shares in droves. In fact, Apple guru Horace Deidu explained
on his blog, Asymco, that the company reduced its share count by a whopping 3.5% since the end of its first quarter (11 million of those shares are not yet reflected in the company's share count). In a roundabout way, that's basically a non-taxable special dividend yielding investors about a 3.5% return.
As Apple Inc. (NASDAQ:AAPL) continues to pull the trigger on its $60 billion share repurchase program, investors should expect to continue to watch their share of the company rise.
Fundamentally, Apple is a straight-up bargain
The company trades at 11 times earnings and about 10 times free cash flow. At valuations like this, Apple Inc. (NASDAQ:AAPL) is basically priced for zero growth going forward. Even if this is Apple's fate, investors can cash in on a dividend that's likely to grow for years to come