Apple, meanwhile, makes most of its money from consumer technology. The iPhone remains its most important product, but the company also sells Macs, iPads, Apple Watches, AirPods, and a growing services business that includes iCloud, Apple Music, Apple TV+, AppleCare, and App Store-related revenue.

Financial comparisons

Now let’s look at their latest reported quarterly numbers:

Right off the bat, Microsoft reported less revenue than Apple, though it keeps more of it. Based on these values, Microsoft’s net margin is 38%, while Apple’s is just below 27%. Don’t get me wrong, both of these are strong margins. However, Microsoft remains more notable, primarily due to its focus on software and cloud subscription services, which are traditionally high-margin businesses.

Microsoft’s lead also extends to its valuation, with a forward P/E at just under 25x, well below Apple’s ~34x. This means that investors are paying less per dollar of Microsoft’s expected earnings than they are for Apple’s. It does not automatically make Microsoft the better stock, but it does make Microsoft more attractive.

Overall, Microsoft appears to have better fundamentals.

Dividend narrative

A company’s financial health is one thing, but being able to pay dividends is another.

At the time of publication, Microsoft has a 24-year streak of dividend increases, a year shy of becoming a Dividend Aristocrat. It pays $3.64 per share yearly, translating to a yield of around 0.87%

Meanwhile, Apple’s streak is lower, with 14 years of consecutive dividend increases. It pays a forward annual dividend of $1.08, translating to a yield of approximately 0.36%, which is also lower than Microsoft’s.

What does Wall Street think?

Microsoft’s dominance reflects Wall Street’s consensus: 48 analysts rate MSFT stock a “Strong Buy,” with mean and high targets suggesting 32%-62% upside potential.

Meanwhile, a consensus among 42 analysts rates AAPL stock a “Moderate Buy.” Its mean-to-high target prices suggest between 1% and 31% upside potential.

Verdict

Based on almost all objective data, Microsoft is the clear winner between these two stocks. It has the edge in performance, financials, dividends, analyst ratings, and high target prices- and everything that suggests it’s a better buy. Microsoft’s dominant exposure in the AI sector will also support its continued growth, at least while the boom is ongoing. That said, I wouldn’t shrug off Apple either. It is an innovative company that dominates the tech market by a wide margin, and its customers closely watch (and buy) its products released yearly… present company included.

On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com