Market value: $913.2 billion
Dividend yield: 1.4%
3-year annual dividend growth rate: 10%
Warren Buffett first bit into Apple (AAPL, $179.98) during the first quarter of 2016, acquiring a stake worth approximately $1 billion at the time.
Since then, Berkshire Hathaway has very aggressively added to its position. In fact, the firm’s stake in Apple is now valued at close to $30 billion, making it Berkshire’s most valuable equity stake.
Some Buffett disciples have been scratching their heads over this move, especially given the Oracle of Omaha’s general distaste for businesses operating in the fast-changing tech sector. However, Apple is a bit of a unique breed. Per Forbes, the company boasts the world’s most valuable brand, yet the stock’s price-to-earnings ratio trades at a discount to the Standard & Poor’s 500-stock index’s multiple.
Apple has created a unique ecosystem by tightly integrating its hardware and software offerings, resulting in a sticky and seamless experience for its customers. With a hoard of cash building, Apple reinstated its dividend in 2012 as part of its plan to return more capital to shareholders.
Thanks to tax reform, Apple plans to bring back most of the $252 billion in cash it holds overseas (minus about $38 billion after tax) to invest in new facilities and jobs. The company’s increased flexibility should also make it easier for Apple to continue returning generous amounts of cash in the form of dividends.
In fact, Morningstar analyst Brian Colello, CPA, wrote, “Given the firm’s whopping $163 billion of net cash today and high likelihood of strong free cash flow generation going forward, we can easily foresee Apple doubling its annual dividend and share repurchases over the next five years.”
