Introduction and conclusion--company is apple inc.

4

Part 1

The following represents the dividend per share for Apple Inc. in the last 9 years and the growth rate of the dividends over the years.

Fiscal Year Ending	Dividend/Share	Growth Rate
2021	0.85	6.25%
2020	0.8	6.67%
2019	0.75	10.29%
2018	0.68	13.33%
2017	0.6	9.09%
2016	0.55	10.00%
2015	0.5	8.70%
2014	0.46	12.20%
2013	0.41	355.56%
2012	0.09

The following shows the average growth rate of the dividend of Apple Inc. over 9 years, 5 years and 3 years:

Recent 3-year average growth Rate	7.74%
Recent 5-year average growth rate	9.13%
Recent 9-year average growth rate	48.01%

Looking at the growth rate of the dividends the growth rates have been decreasing; the growth rate in the last 10 years has been higher compared to the way in which the annual dividends have grown in the last 5 years and 3 years. The growth rate from the last 9 years was 48.01% then it decreased by 38.88% in the last five years. The growth rate further decreased by 1.39% to 7.74% in the last three years. The rates have been decreasing but at a decreasing rate and this is a good indicator for the business.

High end growth rate and low-end growth rate

Low-End Growth Rate	7%
High-end growth rate	9%

The low-end growth rate selected is 7% while the high-end growth rate that was selected for the company is 9%. The selected high-end growth rate is the growth rate for the last 5 years while the low-end growth rate is the growth rate for the most recent three years. The selection of the growth rates is based on the performance of the company which was discussed in the week 1 and week 2 assignments.

One of the financial facts about the company in the last three years is that the profitability greatly decreased. The decrease of the profits was because of the severe impacts of the ongoing pandemic which resulted into low demand for the products and low sales revenue. The company’s profits were very high in the last 5 years and hence the selected high-end growth rate was for the last 5 years(Saluy et al., 2020) Looking at the company and its ratios analyzed in the previous assignments it has had a high debt to equity ratio in the last three years which means that the company has used less equity and hence had to pay less money in dividends for the period.

Part 2: Preliminary evaluation

Constant Dividend Growth Model
Required Rate of Return, r	10%
(Since it is a large cap Company)
Last dividend, D0	0.85
Market Price per share based on low-end growth rate	=0.85(1+0.07)/0.03=$30.31667
Market Price per share based on high-end growth rate	=0.85(1+0.09)/0.01=$92.65

The current stock price for Apple Inc. is $171.95 in the market and the low-end growth rate and high-end growth rate provide a different market price per share. Based on the calculations done on the company data the market price per share based on the low-end growth rate is $30.32 when compared to the price at which the shares are being sold in the market currently, we can conclude that the shares are overvalued in the market. This is because the difference between $30.32 and $171.95 is very big and significant(Jagannathan & Liu, 2019). The market price per share based on high end growth rate is 92.65 and this is below the market price of the shares. From both the low end and the high-end values we can say that the company’s shares are overvalued.

Based on the calculations of the stock price done, the concluded stock price is 92.65 which is the high-end growth rate. The conclusion is based on different facts about the company. Apple Inc. currently sells its stock at $171.95 in the market and hence the low-end growth rate price is very low and has a huge difference with the market price. This can be explained by the decreased profits in the last two years because the company has been struggling to recover from the negative impact of the pandemic on the revenues of the business. The company has had low profit margins and hence the value of the stock has not been growing in the last 3 years(Jagannathan& Liu, 2019). This means that making a conclusion about the company based on the period will be unfair as it does not represent the true state of the company.

References

Jagannathan, R., & Liu, B. (2019). Dividend dynamics, learning, and expected stock index

returns. The Journal of Finance, 74(1), 401-448.

Saluy, A. B., Fitri, E. M., &Novawiguna, K. (2020). The Effect of Capital Structure,

Dividend Policies, and Working Capital Routing on Company Value and Profitability as Intervening Variables in Property and Real Estate Companies in Indonesia Stock Exchange 2014-2018. International Research Journal of Innovations in Engineering and Technology, 4(10), 14.

Sebastian, A., &Siauwijaya, R. (2021). The Impact of Financial Ratios on the Dividend

Payout Ratio in Coal Mining Companies. Business Economic, Communication, and Social Sciences (BECOSS) Journal, 3(2), 51-60.