Due to rock-bottom interest rates, I expect 2015 to be the year of the stock buyback. This is tremendous news for shareholders because fewer shares outstanding help to boost earnings, and support share prices. Truly, 2015 represents an unprecedented opportunity.
And leading the charge on this powerful trend is Apple Inc. (AAPL).
As the maker of the wildly successful iPhone, iPad and iMac computer, Apple hardly needs an introduction. Looking back, Apple hit a rut in 2013 before becoming one of Wall Street’s biggest comeback stories in 2014. For 2015, the gadget giant is looking better than ever because it has big plans to reward shareholders handsomely over the next several quarters.
First, Apple has hiked up its dividend twice in the past two years — a 24% increase to bring AAPL stock to a healthy 1.6% dividend yield. And with a payout ratio of 24.3%, Apple has a healthy cushion for future dividend increases.
Apple also recently increased its stock buyback program to a whopping $90 billion. In the last quarter alone, Apple bought back $17 billion of its stock. Between dividend payments and share repurchases, Apple expects to return $130 billion to shareholders by the end of 2015.
Third, Apple split its stock 7-for-1, last summer. By employing some very wise financial engineering, Apple has essentially stabilized its stock and made it more accessible to a larger group of investors. This strategy has worked beautifully: Since Apple stock split in early June, AAPL has risen more than 24% — soaring past the S&P 500’s 7% gain.
Apple Stock Will Deliver Solid Earnings Growth in 2015
Today, AAPL still trades at a very reasonable 13 times forecast earnings, so there’s plenty of upside left.
Fourth, the company’s earnings prospects are strong. In 2013 and the first half of 2014, Apple had experienced some margin compression, but that trend is now reversing. For FY 2015, analysts are predicting 15.4% annual sales growth and 20.3% earnings growth. To put this into context, the Electronic Equipment industry is expected to post just 4.6% average bottom-line growth.
Better yet, we’ve seen some serious earnings revisions from the analyst community in recent months. In the past 90 days, the consensus FY 2015 EPS estimate has jumped from $7.16 to $7.76 — an 8.4% increase. Analysts are struggling to get a handle on Apple’s earnings potential, so I expect 2015 to bring another four quarters’ worth of earnings surprises.
Apple is once again a growth stock and will be launching exciting new products to further boost its sales, operating margins and earnings for the foreseeable future. Add in a hefty dividend yield and it’s hard not to pick AAPL as my entry for the Best Stocks of 2015 contest.
Louis Navellier is the editor of Blue Chip Growth.