Apple Inc. (AAPL): Goodbye Growth, Hello Income

Ultimately, stock prices are all about expectations. Investors expect Google to continue to grow its revenues and earnings and, hence, its business, so the stock trades at a nice premium of 24.5 times earnings. In other words, investors expect Google to grow into its stock price.

If there’s any chart that explains why Apple has lost its nice price-to-earnings multiple of 16, when the stock traded at an all time high of $700, it’s this one:

AAPL EPS Diluted Quarterly YoY Growth data by YCharts.

Growth rates exceeding 25% no longer seem attainable. In three of the past four quarters, Apple reported decelerating year-over-year growth rates in EPS.

But the tension persists. Analysts, on average, expect Apple earnings to increase at 20% annually for the next five years. At just 10 times earnings, however, this expectation isn’t priced into the stock. On Apple’s Motley Fool CAPS page, 61 of 61 analysts rank Apple stock as an “outperform.” Even so, the market refuses to pay a premium now for an expectation of growth down the line.

Officially an income investment?
Now investors are wondering what’s next. Is Apple stock exiled from growth portfolios and reassigned to the income investment community once and for all?

With a very likely dividend boost just around the corner, Apple might morph into a great dividend stock. But will it ever be a growth stock again? Let us know your thoughts.

The article Apple Stock: Goodbye, Growth; Hello, Income originally appeared on Fool.com.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple and Google.

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