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What’s Driving Apple?

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What drove net sales growth?

Apple (AAPL) has five-year dividend growth of 59%. The company has also maintained an impressive free cash flow balance. In the last five years, Apple’s net sales growth fell once in 2016 by 8%. The tech giant recorded net sales growth of 6% and 13% in 2017 and 1Q18, respectively.

Apple hit the 1.3 billion devices installation milestone in January 2018. Both the developed and emerging markets (especially China and India) drove the growth in 2017. Every product ranging from iPhone, iPad, Mac, and Apple Watch drove the 2017 growth. The year also witnessed the launch of Apple TV 4K and Apple Michigan Avenue. The iPhone X drove the 1Q18 growth across every geographical region. It was a great quarter for both retail and online stores. The App Store, Apple Music, iCloud, and Apple Pay also had an impressive quarter.

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What drove EPS growth?

Cost of sales expanded 7% and 13% in 2017 and 1Q18, respectively, after a 6% decrease in 2016. As a result, gross profit grew 5% and 12% in 2017 and 1Q18, respectively, after a 10% drop in 2016. Operating expenses rose 8%, 11%, and 12% in 2016, 2017, and 1Q18, respectively. Operating income rose 2% and 12% for 2017 and 1Q18, respectively, after a 16% drop in 2016. Other income grew 5% and 104% in 2016 and 2017, respectively, and lost 8% in 1Q18, all of which translated into 6% and 12% net income growth for 2017 and 1Q18, respectively, after a 14% drop in 2016. EPS grew 11% and 16% in 2017 and 1Q18, respectively, after a 10% fall in 2016. Share buybacks enhanced EPS numbers. We’ll continue our discussion on Apple in the next part of the series.

Dividend ETFs with exposure to Apple

The FlexShares Quality Dividend Index Fund (QDF) has a PE of 22.2x and a dividend yield of 2.7%. The FlexShares Quality Dividend Dynamic Index Fund (QDYN) has a PE of 21.1x and a dividend yield of 2.8%.

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