Apple VS Microsoft The safer dividend
Patrick is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Apple and Microsoft have a lot to compare with one another especially for this holiday season. With so much to talk about one must consider each point carefully before they can realize all these two companies really need to worry about.
First you should worry about the positivesfor these two companies. The first thing that these companies can look forward too is no Research and Motion phone yet. This is big for Microsoft because they now have a better chance at gaining ever greater market share, while more users should be looking to get the new IPhone once released. Another thing to consider is Windows 8. This is going to generate cash and healthier margins this year for Microsoft too things definately needed for them. They will grow themselves this holiday season maybe even more so than Apple.
Now some negatives for both. One is Google, enough said. Two Microsoft is near a 52 week high and is bound to dip. Meanwhile Apple is at an all time high, but it still appears to be heading up and should be a good short term bet. Remember though that Apple did grow to fast and they are paying a dividend as well now, which will need to be factored into the price.
Now Apple is at its all time high with a 637.5 billion cap, a P/E around 16, and a dividend yield of 1.67%. Here is the thing though everyone wants a safe dividend and everyone from 1 to 60 has heard of Apple and is buying its stock. These could become a problem in the future. People are making money as we speak. So are they going to be a trillion dollar company. Allright listen. Apple is big and could go higher but dont play them like that. They are right now a short term bet. They will probably hit 800 a share but that would mean a P/E of over 20. They need to crush sales estimates and the only way for them is to increase thier margins. People are holding a lot of Apple stock and it is bound to come down when people start cashing it in. If you want to play Apple do the obvious play, which is now through december going into the Consumer Electonic Show. Remember Apple has used new products to fuel growth and the last major launch was I Pad, if they have something big up thier sleeve then they are definately a long term potentiol play and should be held longer. Otherwise you need to be wary of this stock it grew fast but for the first time has competition out there to worry about. It has moved fast and sometimes a stock moves too fast, too high and must come back down. Dont be surprised when Apple falls. A real play this year is buy now sell december before you get sucked in for longer than you wanted. It is already a huge company and the competition is recovering fast. Dont expect an Apple TV to be a huge boost either thier is too much competition in this market and one TV is not going to make a huge difference. Honestly most people have already priced this into the stock and this stock can be very risky.
As for Microsoft, its doing better. Increased dividend, higher share price, Sony limping, as well as Windows 8 on the way. Things to be looking forward too. Everything looks right about this stock. This company is doing things right. They are better prepared for Apple retaining customers and moving into mobile. X Box did a number on Sony in general and they have this as leverage. This is thier ace in the whole because over the years they performed poorly. Microsoft has a strong portforlio but does not seem to have the ability to directly compete with Apple. This may work to thier advantage because they do not have to produce thier own hardware. Meaning Apple will be forced to compete with everyone else as well from intel to hewlett packard as well. Could turn out to be a huge error for Apple and a huge pop for Microsoft. The other thing about Microsoft to consider is there lack of exposure to the smart phone and tablet market. They need to succeed here or windows is in trouble and so is Microsoft. So what to do here.
Well, Apple is a great buy right now but remember it could come down and quickly. I would expect it to go up this season and begin to settle a little higher going into the spring. It could get too high though and Im skeptical it can keep rising this fast without some sort of huge dip. Be careful here this is no longer a stock that you should be pooring all your money into. The dividend yield is too low at this price and should be avoided at this point as a dividend stock. If you want to play the apple play then play it going into christmas, but be ready to sell this new years or you could see a loss. As for microsoft, well i would stay away right now. Though its real price right now should be considered a discount I believe it will come down to 28 at least. Do not buy right now above 32 or you will be stuck making your money back off the dividend. The yield on Microsoft is strong, but too much and should not of been increased yet. The price should be lower and the dividend lower. If you would like a strong dividend though over the next few years play Microsoft they pay more and are not going anywhere either. Apple could come back down but should stay above its current levels. Buy apple but be ready to sell this year. Look for microsoft lower and sell above 32 which is the safe play. Dont be surprised if later on you see microsoft drop down to 26 a share it is highly likely this price will come down at some point. It has historically dropped down to these levals and should be a safer dividend play than Apple. It pays a bigger one and the share price seems to be more stable.
Fool blogger Fooloneshame does not own any stocks mentioned in the above entry.