Apple has created huge wealth for long-term investors. Apple is now worth about $4.54 trillion, after gaining roughly 51% in the past year. That increase added more than $1.5 trillion to the company's market value.
Apple was a much smaller company 10 years ago. In August 2016, Apple was worth about $580 billion. That means the value Apple added in just the past year is more than 2.5 times the company's entire market value a decade ago, according to The Motley Fool.
Apple stock turns $10,000 into $126,000
A $10,000 investment in Apple in August 2016 would be worth about $126,000 today. Apple shares traded at around $27 in August 2016, after adjusting for the company's 2020 stock split. The stock is now around $311, an increase of about 11.5 times.
The stock price alone would have turned $10,000 into about $115,000. If an investor put $10,000 into Apple shares in August 2016 and simply held the stock, the investment would have grown to roughly $115,000 based only on the share-price increase.
Reinvested dividends would have pushed the investment even higher. With dividends reinvested, the original $10,000 would be worth about $126,000, or around 12.6 times the original investment, according to The Motley Fool.
{{/usCountry}}Reinvested dividends would have pushed the investment even higher. With dividends reinvested, the original $10,000 would be worth about $126,000, or around 12.6 times the original investment, according to The Motley Fool.
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Apple stock price drove most of the gains
Most of Apple's return came from the stock price, not dividends. The dividend played a relatively small role in the total return. Apple's dividend is about twice as large as it was in 2016 on a split-adjusted basis, but the share price increased much faster. Apple's dividend yield has actually fallen sharply. The dividend yield was around 2% in 2016. It is now about 0.35%, based on an annual dividend of $1.08 per share.
Apple earnings grew over the past 10 years
Apple's earnings per share have now reached $8.72 on a trailing 12-month basis. That is about four times the split-adjusted earnings per share from 2016. Apple's shrinking share count also helped investors. The company has bought back a huge number of its own shares over the past decade. Its share count fell from nearly 22 billion split-adjusted shares to about 14.6 billion.
Investors valued Apple at about 13 times earnings in August 2016. At the time, the market largely viewed Apple as a mature hardware company. Today, investors are paying about 36 times earnings. That means Apple's valuation multiple has almost tripled from its 2016 level, according to The Motley Fool.
Apple valuation nearly tripled since 2016
The combination of earnings growth and the higher valuation drove Apple's huge stock return. Apple's earnings grew roughly fourfold, while the P/E multiple increased from about 13 to 36. Together, those two changes explain essentially the entire 11.5-fold increase in Apple's share price.
This is important for investors looking at Apple's next 10 years. The company cannot rely on another huge increase in its valuation multiple to produce the same kind of return. If the P/E multiple tripled again from today's level, investors would be paying more than 100 times earnings. That means future gains will likely depend much more on Apple's business growth. For Apple to deliver strong returns in the next decade, the company will need to keep increasing its earnings rather than simply becoming more expensive relative to its profits.
In Apple's latest quarter, earnings per share increased 29%. EPS rose to $2.02, although the figure included an 11-cent benefit from tariff refunds. Even without the tariff refund, earnings growth remained strong. Excluding that 11-cent benefit, Apple's earnings still grew by about 22%. Apple also reached another record for its installed base. The company said the number of active devices being used around the world reached another all-time high.
Growing at double-digit rates is harder for a company this large. Apple had a much smaller revenue base in 2016, so producing rapid growth was easier. With revenue now above $400 billion, maintaining double-digit earnings growth will require much more from the business. Artificial intelligence could become an important growth opportunity. The Motley Fool argues that Apple's AI features could encourage upgrades across its enormous installed base of devices.
Can Apple stock repeat its 10-year gains?
A $10,000 investment grew to about $126,000, but that return was helped by both strong earnings growth and a major increase in Apple's valuation multiple. The next $10,000-to-$126,000 transformation would require much more. Apple would need its earnings to grow substantially because investors cannot reasonably expect the P/E multiple to triple again from today's already-high level.
The Motley Fool remains positive about Apple as a business but is more cautious about expecting another identical return. The publication says Apple remains a high-quality company with strong staying power, but investors should keep the valuation in mind. Apple's next decade will have to be earned through profits. The huge return from 2016 to today was driven by both business growth and investors paying a much higher price for Apple's earnings. Going forward, earnings growth is likely to matter far more.