For many investors, the idea of dividend stocks and growth stocks being mutually exclusive is deeply ingrained in their investment philosophy. Traditionally, a company paying dividends was perceived to have plateaued in growth as it redirected earnings to its shareholders. However, Apple’s decision to reinitiate its dividend in 2012 defied this stereotype, indicating not the end, but the inception of substantial earnings growth. This strategic move conveyed the company’s confidence in its future earnings trajectory, making it an opportune time for investors to jump in.
Historically, the notion of tech companies initiating dividends signaled a burgeoning investment prospect, a notion exemplified by the behemoth, Apple (NASDAQ: AAPL).
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Apple’s Monumental Growth Trajectory
Apple has presented a consistent face to investors over the past 12 years, but the numbers tell a deeper story of phenomenal growth. In 2012, over 50% of Apple’s revenue was derived from iPhone sales, a trend successfully perpetuated into 2023, with a revenue surge from $80 billion to $200 billion. The iPhone remains the bedrock of Apple’s business, serving as the gateway to the Apple ecosystem, encompassing wearables, Mac computers, and a suite of services including iCloud, Apple Music, and the App Store.
Notably, the most remarkable transformation at Apple has been the exponential growth of its services business, generating $85 billion in revenue last year, reflecting a tenfold appreciation since 2012. This surge stems from the robust performance of the App Store, Apple’s subscription services, and a lucrative search engine contract with Alphabet’s Google.
Crucially, Apple has continuously invested in fortifying its future, evident from the stupendous rise in research and development expenses, escalating from $3.4 billion in 2012 to nearly $30 billion last year. This strategic deployment encompasses autonomous chip designs, artificial intelligence ventures, and the forthcoming augmented reality headset, the Apple Vision Pro.
The Rewarding Fruit of Investment in Apple
On March 19, 2012, Apple announced its strategic reinitiation of the dividend, a harbinger for those astute enough to seize the opportunity. Post-announcement, shares traded at approximately $600 each, presenting a propitious entry point. Factoring in two stock splits (7-for-1 in 2014 and 4-for-1 in 2020), an initial $1,000 investment would have burgeoned to approximately $8,700, including dividend payments of $361.65. Reinvesting these dividends would have further swollen the investment to around $10,300, affirming an astoundingly nine-fold growth.
Comparatively, an equivalent investment in an S&P 500 index fund would yield approximately $4,500 today if dividends were reinvested, less than half the returns offered by Apple.
AAPL Total Return Level data by YCharts
The Future Landscape for Apple
Boasting a staggering average annual free cash flow of over $100 billion for the last three years, Apple continues to amass a net cash position of approximately $65 billion, solidifying its stature as a cash-generating dynamo. With the aim of achieving net cash neutrality, Apple is committed to bolstering shareholders with further cash disbursements.
Following a sluggish 2023, Apple is poised for a revenue resurgence with the launch of generative AI features and the initial rollout of the Apple Vision Pro. These strategic initiatives are poised to redefine the company’s trajectory significantly.
Apple’s reinvigorated stock performance exemplifies that the initiation of dividends doesn’t foreshadow stunted growth. Since reinitiating its dividend, Apple has introduced several groundbreaking consumer electronic products, exponentially expanded its services business, and demonstrated a robust pipeline for future growth, exemplified by a tenfold surge in its R&D expenditure. This success narrative endorses the notion that a well-administered company’s stock can continue to deliver unparalleled returns post the commencement of dividends.
Bearing testimony to Apple’s trajectory, investors seeking a reminiscent opportunity akin to Apple in 2012 should scrutinize Meta Platforms which recently announced a dividend alongside its fourth-quarter earnings release.
Should potential investors seize the moment and invest $1,000 in Apple right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Alphabet, Apple, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, and Meta Platforms. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
