Apple Dividends Crush Facebook and Amazon, as Do 4 Others

NEW YORK (TheStreet) -- With Wall Street's quarter-to-quarter obsession with growth, investors have seemingly fallen out of love with anything that lacks momentum.

But with 2014's first-quarter earnings season approaching an end, I've become aware that that revenue growth alone is no longer the driving force it use to be. The post-earnings declines seen in names like Amazon (AMZN), Facebook (FB) and Google (GOOG) serves as a perfect example.

Walls Street's growth obsession is beginning to shift towards a value bias. To that end, I've come up with five stocks that should outperform the market for the next five years. It is by then, I believe, that this sudden shift will become be a full-blown embrace.

The first name on the list is Apple (AAPL), which I've told you since it traded at $400 was the biggest no-brainer on the market. Apple stock has soared more than 15% over the past week, following the company's strong earnings and revenue beat.

Aside from having sold 43 million iPhones in its second-quarter (versus estimates of 38 million), Apple is becoming more shareholder-friendly. The company added $30 billion to its stock-buyback plan, raised its dividend about 8% and declared a 7-for-1 stock split.

All told, the company will return $130 billion to shareholders. Add the possibility of new product launches this year, whether iWatch or iTV, Apple is back on the path, which it embarked upon with the original iPod more than a decade ago.

There are investors who are still kicking themselves for having missed Apple's first run. But with the stock still closing Thursday at $591.19, which is still 16% below its all-time high, I wouldn't wait to get in now.

Assuming Apple can recapture that same magic in wearables and TV's, there potential for $10 billion in additional revenues starting next year. And that's being conservative. My 5-year price target sits at an even $1,000, or a split-adjusted price of $142.85.


Next on the list is Intel (INTC). Granted, the company underestimated the transition to smartphones and tablets. But following a solid first-quarter report, Intel has all of the makings of a successful turnaround story.

I've become impressed by the degree with which Intel has accelerated the company's push into mobile, while (at the same time) shedding the company's dependency on personal computers. More importantly, by embracing the "Internet of Things," Intel is skating to where the puck is going to be.

The Internet of Things, which includes wearable devices, can potentially become a lucrative opportunity for Intel, especially given that consumers are buying fewer PCs. The wearable gadgets market is predicted to grow to $8 billion in the next four years (compare that to 2013's $1.4 billion).

To seize that growth opportunity, Intel has begun to make significant capital investments, including its acquisition of Basis Science, a company that specializes in wearable device technologies for health and wellness applications industry. With Intel stock closing Thursday at $26.45, I project the stock to double to at $50 in five years. And it pays a strong dividend at 3.4%.

If you've been following my articles, you might be surprised to find that IBM (IBM) has made this list. The stock has been all over the map this year. With shares closing Thursday at $193.53, IBM has posted year-to-date gains of 3.7%. At one point, the stock was down close to 8% following the company's weak January quarter.

The company is just too big to produce the sort of growth to inspire investors to believe. This was, again, the issue in the most recent quarter, as revenue missed estimates. IBM is a money-making machine. Very few companies can match Big Blue when it comes to cash flow and returns on capital. And when you factor IBM's strong yield of 2.00%, not to mention the safety net it brings, it's tough to argue against the stock.

IBM's future is interesting, with significant capital investments in the cloud, including cloud marketing firm Silverpop and database provider Cloudant. IBM should trade around $260 in five years on the basis on cash flow growth and cloud market share gains.

It's still a little surprising to see how little Cisco's (CSCO) stock has moved this year. The stock closed Thursday at $23.01, up 4% year to date. But Cisco stock is down more than 12% over the trailing twelve months. This won't continue. As with IBM, Cisco has struggled with revenue growth. But this is a company, whose equipment still powers more than half of the internet.

In the most recent quarter, Cisco reported earnings per share of 47 cents, excluding items, on revenue of $11.16 billion. The company beat consensus earnings estimates of 46 cents on $11.03 billion in revenue. Management also raised the company's quarterly dividend to 19 cents from 17 cents a share.

Cisco is not going to put up gaudy numbers like it did at the height of the dotcom era. But it doesn't have to. Investors only need to understanding where the company is trying to go. Its recent acquisition points to higher-margin cloud business and transitioning out of hardware.

Cisco still has ambitions of being a traffic highway. With the company's ability to collect a toll on each bit of data, investors would be wise to buy and hold one of the most consistent blue-chip tech stocks on the market.

Last on our list is Microsoft (MSFT). The company's board, which under former CEO Steve Ballmer, was everyone's punching bag. But things have changed. While I haven't been the company's biggest fan, I've nonetheless been pleased with the direction in which new Satya Nadella is taking the company. The stock closed Thursday at an even $40, up close to 8% year to date.

Although the company recently reported flat revenue, it was nonetheless encouraging that Microsoft posted gains from its dominant Windows franchise, which many had feared was in decline. And when you factor the improvements in cloud computing services like Azure, it does show that Microsoft's transition from a PC-dependent business is taking shape.

Equally, strong was revenue from the company's devices and consumer products, which rose 12% to $8.30 billion. Here, too, as with IBM and Cisco, Microsoft has struggled with growth. But in Nadella, the company has installed someone who is unafraid to think outside the box and take some risks.

In the next five years, investors may not recognize what Microsoft has become, which will be a good thing. I project a more dominant cloud player that will create apps for the sort of Internet-of-Things transition that companies like Intel are looking to support. At around $40 today, Microsoft stock should reach $60 to $75 in the next five year. And the company pays one of the best dividends at $2.8%.

At the time of publication, the author was long AAPL and held no position in any of the stocks mentioned.


This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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