We recently published a list of 10 Best Innovative Stocks that Pay Dividends. In this article, we are going to take a look at where Apple Inc. (NASDAQ:AAPL) stands against the other best innovative stocks that pay dividends.
Innovation plays a crucial role in today’s market. With the significant attention tech stocks have gained over the past year, it’s clear where investors are directing their funds. Tech firms are leveraging disruptive technologies like artificial intelligence to process vast, complex datasets. In the healthcare sector, advancements in research and development (R&D) have led to life-saving drug therapies and treatments. Meanwhile, the growing impact of climate change is pushing energy and utility companies to prioritize renewable energy sources. Therefore, innovation lies at the heart of every industry today.
Businesses in the US and globally swiftly recognized the influence of innovation on their growth and operations, and they are gradually shaping their activities around it. A recent McKinsey survey of over 1,000 executives revealed that companies with a strong culture of innovation are twice as successful as some of their peers in scaling digital transformations. These innovative firms focus on technologies and changes to their operating models that promote rapid learning and adaptation—essential components of innovation. The report also highlighted that 14 of the top 20 global companies have leveraged innovation to either expand existing markets or create entirely new ones.
Read also: Top 18 Automotive Industry Innovations and Trends
A key component of innovation is R&D, which focuses on systematic and scientific investigation to create new products, technologies, or processes. Through R&D investments, companies can strengthen their abilities, explore fresh ideas, and discover innovative solutions to address customer demands. Businesses worldwide, particularly in the pharmaceutical sector, have boosted their R&D investments to develop new products that meet the demands of their customers. Financial Times reported that R&D in the US has grown in recent decades, increasing from 2.2% of GDP in the 1980s to 3.4% in 2021. This rise is mainly due to the private sector’s contribution, which doubled to 2.5% of GDP. Moreover, the percentage of the population involved in patent creation almost doubled during this time.
It’s not just established companies that are embracing innovation in their operations; the rise of US startups also reflects this trend, as they introduce groundbreaking business ideas previously unheard of. Economist John Haltiwanger found that Americans were starting new businesses at an unprecedented rate. And he’s not mistaken. In 2020, more new businesses were launched than in any previous year, with 2021 following closely behind. According to the Kauffman Indicators of Entrepreneurship, the one-year survival rate for these startups exceeded 80% in 2021, marking the highest rate since 1999. Haltiwanger noted that a surge in new businesses is a strong indicator of job creation, innovation, and productivity growth within the economy. He further said that startup booms not only reflect technological innovation but also significantly drive it. Startups explore how to leverage new technologies, experiment with them, and create new products, pushing competitors to adapt and innovate in response. Research from Texas McCombs, which examined 6,116 patents from the mid-1970s to 2016, highlighted the impact of startups on innovation. The study found that patents from startups were cited 8.5% more each year and 21% more over a nine-year period compared to patents from established companies.
Our Methodology:
For this article, we scanned Insider Monkey’s database of 912 hedge funds as of Q2 2024 and picked companies that actively prioritize and promote the development of new and groundbreaking ideas, products, services, or business processes. From that list, we picked 10 stocks with the highest number of hedge fund investors and ranked them in ascending order of hedge funds’ sentiment towards them. These companies belong to different sectors, including healthcare, technology, aerospace, and defense.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A wide view of an Apple store, showing the range of products the company offers.
Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) has played a key role in creating revolutionary devices and services that have transformed the consumer electronics market, including the iPhone, iPad, iTunes, and the App Store, among others. The stock has surged by nearly 19% since the start of 2024 and in the past 12 months, it has delivered a 24% return. The company is delivering strong returns this year, even with some fluctuations in iPhone sales. In fiscal Q3 2024, it reported a 14.5% quarter-over-quarter decrease in iPhone sales, totaling over $39.2 billion.
Apple Inc. (NASDAQ:AAPL)’s overall revenue for the quarter came in at $85.8 billion, which grew by 5% from the same period last year. During the quarter, the company also unveiled significant updates to its software platforms at the Worldwide Developers Conference. This included Apple Intelligence, a groundbreaking personal intelligence system that integrates advanced, private generative AI models into the core of the iPhone, iPad, and Mac. Baron Funds highlighted the strengths in the company’s business in its Q2 2024 investor letter. Here is what the firm has to say about AAPL:
“This quarter we re-initiated a position in Apple Inc. (NASDAQ:AAPL), a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on[1]device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
Being a dividend payer, Apple Inc. (NASDAQ:AAPL) has a strong cash position. In the most recent quarter, the company reported an operating cash flow of $29 billion. It returned $32 billion to shareholders through dividends and share repurchases. The company holds a 12-year streak of consistent dividend growth, which makes it one of the best innovative stocks that pay dividends. It currently pays a quarterly dividend of $0.25 per share and has a dividend yield of 0.45%, as of September 18.
Apple Inc. (NASDAQ:AAPL) was a popular stock among elite funds during Q2 2024, as per Insider Monkey’s database. The hedge fund positions in the company jumped to 184 in Q2, from 150 in the previous quarter. The stakes owned by these hedge funds have a collective value of more than $124 billion.
Overall, AAPL ranks 2nd on our list of best innovative stocks that pay dividends. While we acknowledge the potential for AAPL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AAPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.