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Apple vs Microsoft – The Motley Fool


Both of them Apple (NASDAQ: AAPL) Y Microsoft (NASDAQ: MSFT) They have seen their shares fall sharply recently. However, Apple's shares have been particularly affected, declining 23% since October 1, a period during which Microsoft and the S & P 500 They fell around 7% and 8%, respectively.

This recent volatility generates an interesting dilemma, and possibly an opportunity. Does Apple's exaggerated decline make stocks a better buy than Microsoft? This is a particularly timely question for dividend investors, since these two technology stocks pay significant and growing dividends.

Is it time for investors to collect shares of one of these dividend shares?

A lot of cash

Image source: Getty Images.


Dividend yield forward

Payment ratio

EPS growth 12 months ago (YOY)




Data source: Yahoo! Finance and Reuters. YOY = year after year.

Everything seems to be going well for the Microsoft software giant recently. Revenue and earnings per share increased 19% and 36% year-on-year, respectively, in the company's most recent quarter, as Microsoft's cloud-based products helped drive strong growth and operating leverage. The software company's momentum is further highlighted by its 24% growth in profits year-over-year during the final 12-month period.

In addition, with the help of Microsoft's recent 9.5% dividend increase and lower share price, the software giant has a strong yield on term dividends (expected annual dividend payments by percentage as a percentage of the price of the dividend). the shares of a company) of 1.8%.

Looking ahead, investors should expect Microsoft's dividend to continue growing. By paying only 41% of your dividend earnings, there is plenty of room for dividend growth. In addition, the key catalysts for Microsoft's business, that is, its various commercial cloud products, continue to grow rapidly. Revenues from the commercial cloud increased 47% year-on-year to $ 8.5 billion (29% of total revenues) in the first quarter of Microsoft's 2019 fiscal year. The continued growth of Microsoft's commercial cloud products should help drive stronger earnings growth.


Dividend yield forward

Payment ratio

EPS growth 12 months ago (YOY)




Data source: Reuters and Apple's fourth quarter financial statements. YOY = year after year.

In the last 12 months, Apple's business seems to be on fire. Revenues during this period increased by 16% and earnings per share increased by 29%. This growth was helped mainly by a thriving iPhone business, which recorded an increase in revenues of 18% year-on-year to the sum of $ 167 billion. In addition, the year-on-year growth of 24% and 35% in revenues from services and other products, respectively, were also significant catalysts. Together, these segments represented around 20% of revenues.

But it is Apple's future potential that worries some investors. The company's guidance for its first quarter of fiscal year 2019 implies only one year to year revenue growth of 1% to 5%. Even so, Apple's shares manage to look attractive even with its disappointing outlook for the first quarter. The difference is made in the valuation, where Apple easily exceeds Microsoft. Thanks to the decline of stocks recently, Apple has a free-to-cash price flow rate of just 12.3, extremely conservative for a market leader with impressive pricing power. This compares with Microsoft's premium valuation, as evidenced by its free cash flow ratio of 26.

Adding Apple's significant dividend yield of 1.7% and its very low payment rate of only 27%, the iPhone maker highlights Microsoft as the best dividend stock, despite what could be a year of slow growth for the Apple business.

Teresa Kersten, a LinkedIn employee, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Daniel Sparks owns shares of Apple. The Motley Fool owns shares and recommends Apple. The Motley Fool owns shares of Microsoft and has the following options: long calls of $ 150 on Apple in January of 2020 and calls of $ 155 on Apple short of January of 2020. Motley Fool has a disclosure policy.

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