Apple (NASDAQ:AAPL) made history on Aug. 2, 2018, when it became the first U.S. public company in history to achieve a market cap of $1 trillion. Since then, the company has maintained and even extended its lead on the competition, currently clocking in at roughly $2.25 trillion.
The tech titan’s detractors insist that there are no worlds left for Apple to conquer and investors would be better served to put their money elsewhere. Yet even as the most valuable company in the world, there are still plenty of reasons for investors to buy Apple stock and never sell. Let’s look at six reasons in particular.
1. The Warren Buffett seal of approval
Investors could do far worse than follow the example of legendary money manager Warren Buffett. Since taking the helm of Berkshire Hathaway in 1965, the so-called “Oracle of Omaha” has led investors to breathtaking returns, delivering a compound annual growth rate of more than 20%. By the end of 2020, its overall returns grew by a staggering 2,810,526% since he took it over.
Buffett has made no secret of his love of Apple, saying “It’s probably the best business I know in the world.” He’s gone even further, noting:
We bought about 5% of the company. I’d love to own 100% of it. … We like very much the economics of their activities. We like very much the management and the way they think.
That’s nothing less than a ringing endorsement from one of the world’s most successful investors.
2. The resurgence of the iPhone
It wasn’t terribly long ago that some were declaring the death of the iPhone, but the release of its latest device product lineup has shown that simply isn’t the case. Apple launched four new iPhone models in 2020 — the most ever released in a single year. The iPhone 12, 12 Mini, 12 Pro, and 12 Pro Max run the gamut in terms of retail price and capabilities, and they truly offer something for everyone.
During the 2020 holiday quarter, Apple reported all-time record revenue of $111 billion, up 21% year over year, with 59% of that coming from iPhone sales. That could be just the beginning. Earlier this year, CEO Tim Cook revealed that Apple has an installed base of 1.65 billion devices, including more than 1 billion active iPhones. Wedbush analyst Daniel Ives estimates that roughly 40% of iPhone users haven’t upgraded their device over the past 3.5 years. This could be the beginning of the long-awaited “supercycle,” which could ultimately drive Apple’s market cap to $3 trillion over the coming year.
3. Apple: It’s what the fashionable are wearing
Investors shouldn’t underestimate the growing importance of Apple’s wearables business. In fiscal 2020 (ended Sept. 26, 2020), the company’s wearables, home, and accessories segment grew 25% compared to 2019, generating a record $30 billion and accounting for more than 11% of Apple’s total revenue. Not only that, but the segment ended the year on a high note, with each product category — wearables, home, and accessories — generating record sales. Apple noted at the time that its “wearables business is now the size of a Fortune 130 company.”
Over the past six months, growth in the segment has accelerated. Wearables, home, and accessories revenue climbed nearly 28% year over year, led by strong demand for AirPods, AirPods Pro, and Apple Watch.
4. It’s all about the services
Cook announced in early 2017 that Apple was aiming to double its services revenue by the end of 2020. In July 2020, he revealed that Apple had achieved that lofty goal a full six months ahead of schedule.
The business is off to a quick start in 2021. For Apple’s fiscal 2021 second quarter (ended March 27, 2021), the services segment posted all-time record revenue of $16.9 billion, up nearly 27% year over year, and marking the fastest rate of growth in more than two years.
The gains were driven by 660 million paid subscribers across Apple’s services segment, which includes Apple TV+, Apple Music, the App Store, and iCloud, among others. CFO Luca Maestri said that the company’s video, music, games, and advertising businesses all had a record-setting quarter. The segment represents roughly 19% of Apple’s total revenue — even with the recent surge in iPhone sales.
5. Dividends: The gift that keeps on giving
Apple resumed its dividend in 2012 after a 17-year hiatus, and it has since become a dividend powerhouse. The quarterly payout resumed at a split-adjusted $0.095 and has risen 132% in just nine years.
Apple announced this week that it will boost the quarterly payout to $0.22 per share, an increase of 7% for 2021. Equally as important, the company is using just 22% of its profits to fund the dividend, giving Apple plenty of room for future increases.
6. Fewer shares = a greater piece of the Apple pie
Another aspect of Apple’s capital return policy is its aggressive share repurchase plan. The company has been buying back shares for years. With each quarter that goes by, Apple shareholders own a larger share of the Apple pie. Over the past decade, Apple’s share count has declined by nearly 36%.
The company has retired roughly 1% of its shares, on average, in each of the past four quarters and has plans to continue this shareholder-friendly practice. Just this week, Apple announced that it was adding an additional $90 billion to its existing share repurchase program.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
View more information: https://www.fool.com/investing/2021/05/03/6-reasons-to-buy-apple-stock-and-never-sell/