Disney vs Apple Stock: Which Is Best?

Disney vs Apple Stock: There are some brands that capture the world’s imagination, creating products so innovative that they literally change the course of history. When the Walt Disney Company developed its first short films in 1923, no one could have guessed what an impact the tiny company would go on to have in popular culture.

Mickey Mouse made his debut in 1928, and Disney released its first full length animated feature, Snow White, in 1937. From there, the company grew at a tremendous rate and boasts a market cap of $251.34 billion today.

In 2019, Disney came in at number eight on Forbes’ list of the world’s most valuable brands. This offered additional validation that Disney stock is a smart way to ensure long-term stability in any portfolio.

However, despite Disney’s massive and continuing success, it isn’t the top brand on the Forbes list. That honor is reserved for Apple, which is roughly 50 years younger, but many times more valuable. In recent months, Apple’s  market cap has exceeded $1.39 trillion. By any measure, that is an extraordinary achievement, but it is particularly impressive given the company’s roots.

Forget the brand value though, which stock is best: Apple vs Disney?

Apple Launched 50 Years After Disney But Surpassed The Mouse House

Steve Jobs and Steve Wozniak, the visionaries behind Apple, launched their enterprise in Jobs’ garage.

Their goal was to develop a new generation of computers that were small enough and easy enough to use that they could be added to any home or office.

The Steves started working on the project in 1976, and by 1977, they were selling their machines to individuals and businesses at an astonishing rate. In 1978, sales hit $7.8 million, and in 1980, that figure rose to $117 million.

That year, Apple held its IPO, and investors have never looked back. From those first personal computers to the iPod, iPhone, and iPad, Apple products led the digital revolution.

Early investors have made a fortune from Apple shares, but that doesn’t mean it’s too late to buy in. Today, Apple stock remains a highly-recommended component of any well-diversified portfolio.

With two strong companies on the table, some investors want to know, in the battle of Disney vs. Apple stock, which is the better buy?

Apple vs. Disney Stock: Pros and Cons

There are a variety of comparisons to be made between Apple and Disney, and each has areas where it comes out ahead. One way to look at these blue chip stocks is through the dividend lens.

Neither is on par with the average dividend yield delivered by S&P 500 peers, which comes in at approximately 1.98 percent. Apple’s dividend yield is closer to 1.5 percent, and Disney is slightly lower at 1.3 percent.

However, both exceed the S&P average in terms of dividend growth. In the past five years, Apple increased dividends by an average annual rate of 10.4 percent. Disney’s average annual growth for the same period was 9.9 percent. The next logical question, of course, is whether this rate of growth will continue.

Most analysts base their dividend growth predictions on a company’s payout ratio – a snapshot of the percentage of earnings paid as dividends.

For Apple, the payout ratio is 27 percent, which doesn’t leave a lot of room for growth. On the other hand, Disney is currently paying out just 19 percent of its earnings, which indicates the increased dividend yields may continue on their current trend.

With that said, neither company has payout ratios that are particularly high. As recently as 2015, the average for S&P 500 companies was 43.2 percent, and it’s approximately 36 percent today. In a review of individual companies, the difference is even more conspicuous.

For example, Texas Instruments has a dividend payout ratio of 70.1 percent, and Maxim Integrated Products’ is at 79 percent.

Is Disney Stock a Buy?

The Disney brand is so powerful and the company holds so many valuable assets, it could realistically sit back and take a break from generating new revenue streams, and it would likely continue to generate profit.

However, Disney leaders continue to aggressively grow the business. For example, Disney recently launched its signature streaming service, Disney+, in an effort to compete with Netflix.

More importantly, Disney is positioning itself as a leader in the massive streaming market through smart entertainment acquisitions.

The company purchased LucasFilms and the Star Wars franchise, and it owns Marvel Entertainment – along with the world’s most popular superheroes.

That’s just a taste of the company’s collection. By any measure, Disney is in an ideal place to corner the entertainment market for years to come.

Should You Invest in Apple Stock?

Some investors have questioned whether Apple stock will continue to return value to shareholders, because there has been a marked plateau in iPhone sales.

Essentially, the smartphone market is saturated, and the company hasn’t introduced any new features that have convinced large swaths of consumers to trade up.

However, what investors may not realize is that Apple doesn’t rely on iPhone sales as heavily as it once did. Today, the company is focused on growing its wearable and service segments, and it has already realized big successes.

The segment that covers wearables, including the popular Apple watch and the lineup of Airpod products, increased sales by 54 percent in the quarter ending September 30, 2019.

In general, wearable tech spending is expected to grow by 55 percent through 2021. That means plenty of potential for Apple shareholders.

Disney vs. Apple Stock: The Bottom Line

The bottom line is that in a competition between Disney and Apple, there is no clear winner. Both can play an integral role in building value and generating income in a diversified portfolio.

If you have to choose, it’s simply a matter of personal preference and a quick look at your financial goals. Disney may have more room for growth from an income perspective, while Apple pays slightly more in the short-term.

Both have excellent prospects for building value in the short-term and the long-term.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.