Apple vs. Microsoft – The Motley Fool

Both Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) have seen their shares fall sharply recently. But Apple's shares have been hit particularly hard, with a 23% drop since October 1 – a period during which Microsoft and the US S & P 500 dropped about 7% and 8%, respectively.

This recent volatility raises an interesting dilemma – and possibly an opportunity. Does the disproportionate decline of Apple make the stock a better buy than Microsoft? This is a particularly timely issue for dividend investors as these two technology stocks pay significant and growing dividends.

Is it time for investors to acquire shares in one of these dividends?

A pile of money

Source of the image: Getty Images.


Term dividend yield

The distribution ratio

Earnings per share growth over 12 months (YYYY)




Data source: Yahoo! Finance and Reuters. YOY = from one year to the next.

Everything seems to be going for the giant Microsoft software recently. Revenue and earnings per share increased by 19% and 36%, respectively, in the company's last quarter, driven by Microsoft cloud products that contributed to strong growth and leverage operational. The dynamism of the software company is also highlighted by its 24% year-over-year growth in earnings per share over 12 months.

In addition, with the recent 9.5% increase in Microsoft's dividend and lower share price, the software giant has a strong dividend yield (expected annual dividends per share) share price) of 1.8%.

Investors should expect Microsoft's dividend to continue to grow. By paying only 41% of its earnings as dividends, there is plenty of room for dividend growth. In addition, the main drivers of Microsoft's business, namely its various cloud computing products, continue to grow rapidly. The business cloud's business figure has increased 47% from one year to the next to reach $ 8.5 billion (29% of total revenue) during the first quarter of Microsoft for the 2019 fiscal year. The continued growth of Microsoft's commercial cloud products is expected to contribute to stronger earnings growth.


Term dividend yield

The distribution ratio

Earnings per share growth over 12 months (YYYY)




Data source: Reuters and fourth quarter financial statements of Apple. YOY = from one year to the next.

On a twelve month basis, Apple's business seems to be on fire. Revenues during this period increased by 16% and earnings per share by 29%. This growth was mainly supported by a flourishing iPhone business, whose revenues grew 18% over the previous year, reaching a record $ 167 billion. In addition, the year-on-year growth of 24% and 35% of revenue from services and other products, have also been significant catalysts. Together, these segments accounted for about 20% of the revenue.

But that is the future potential of Apple that worries some investors. The Company's forecast for the first quarter of its 2019 fiscal year imply revenue growth of only 1% to 5% over the prior year. Still, Apple's stock is still attractive, despite the disappointing outlook for the first quarter. The difference is made in the evaluation, where Apple easily beats Microsoft. Thanks to the recent decline in the stock, Apple has a price / free cash flow ratio of only 12.3, which is extremely conservative for a market leader with impressive pricing power. This compares to the valuation of Microsoft's premiums, as evidenced by its price / free cash flow ratio of 26.

Adding to Apple's significant dividend yield of 1.7% and at its very low payout ratio of just 27%, the iPhone maker qualifies Microsoft for a better dividend, despite a year of slow growth for companies. Apple's activities.

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

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