Are you a shareholder of either Apple (AAPL 1.27%) or ASML Holding (ASML -1.03%)? If so, congratulations: You recently became incrementally richer. As is their habit, both companies recently declared dividend raises. Still, while this means a bit more coin in the bank accounts of their investors, it doesn't necessarily mean either company is investment-worthy today.
So let's put Apple and ASML under the microscope and see if they pass inspection.
1. Apple
It's a little hard to imagine these days, but for the first few decades of its existence, Apple was basically a pure-play tech hardware company. It had a regularly refreshed lineup of personal computers that usually won praise for their quality and utility although the company never became a No. 1 producer of mass-market machines.
These days, of course, Apple is an electronics and consumer-goods powerhouse that has sprouted thick branches from that trunk of original computer tech. We see iPhones everywhere, and it's not unusual for a household to have more than a single iPad tablet. Ever bold, the tech giant has pushed confidently into other product categories such as smartwatches and even computer chips.
Apple has cleverly positioned itself as a broadening electronics retailer whose products all operate on the same software platform. With this, its mighty App Store draws billions of dollars in revenue from the software you and I have on our iDevices, be it purchase charges, in-store buys, or subscriptions. The iOS operating system will continue to be foundational, and those apps and commerce opportunities will keep coming.
The King of Cupertino has been on its throne for a long time now, but it still seems like it has plenty of growth in store. Across all of its fiscal 2022, Apple managed to increase its net sales by 8%, with net income improving by 5%.
Macroeconomic strains and supply issues have dinged 2023 results so far, but that should reverse in the next year. On average, analysts are modeling 6% growth on the top line for 2024 and, much better, almost 10% improvement in per-share net income.
So is it any wonder that Apple just pulled the trigger on yet another dividend raise? The new quarterly disbursement is $0.24 per share, 4% higher than its previous payout. This was paid on May 18.
While the enhanced amount doesn't make it the highest yielder on the scene (at under 0.6%), it represents the 11th straight raise for the company, which seems fully determined to keep rewarding its shareholders.
2. ASML
In contrast to the overly familiar Apple, ASML is quite the under-the-radar stock. Based in the Netherlands, the company produces the photolithography machines used to make computer chips. In fact, it's the sole maker of extreme ultraviolet lithography (EUV) devices, the only machines that can produce certain types of advanced chips.
As you might imagine, this is a monster business in a world stuffed full of smart devices, servers, and computers. Enduringly strong demand for chips keeps pushing ASML's financials ever higher. In its first quarter, the company reaped $7.3 billion in revenue, a very high leap over the $3.8 billion a mere one year prior. Not to be outdone, net income came in nearly three times higher, at $2.1 billion, against $750 million from a year ago.
As a result, ASML is a highly profitable company that throws off a lot of cash. It likes to direct some of this to its shareholders, and recently it rewarded them with -- you guessed it -- a dividend raise. The company's quarterly payout now stands at 1.69 euros ($1.82) per share, a robust 23% higher than the 1.37 euros ($1.49) it was distributing previously.
ASML's dividend raise kicked in with the quarterly payout dispensed on May 10. At the most recent closing share price, the new amount yields just over 1%.
None of this is a fluke or a one-off. ASML is facing the "good problem" of being too popular -- to the point where at the end of the first quarter, its order backlog was an intimidating $42 billion. That's nearly double the revenue it earned in all of 2022. How's that for popularity? Particularly with an explosion in the appeal and prominence of artificial intelligence (AI), consumers' devices will need ever more computing power.
ASML is guiding for 25% growth on the top line for 2023 compared to the previous year. Profitability should continue to be strong, ringing in at a gross margin of around 50%. We can easily imagine more double-digit growth in future years. With that kind of potential, ASML looks like a great stock to own, and now looks like a good time to own it.
