Could Apple Stock help you become a millionaire?

Without a doubt, the tech giant Apple (NASDAQ:AAPL) has created life-changing wealth for countless investors. All you had to do was get the chance to hold the stock for a portion of the stock’s 143,000% lifetime total returns. But today the company has a market capitalization of $2.3 trillion, so it’s far too big to see such high returns in the future.

But don’t make the mistake of doubting Apple’s wealth-building prowess. The stock may be past its heyday, but there’s plenty of juice to squeeze out for long-term investors. Here’s how Apple can still help you build a diversified million-dollar portfolio — it might take a little longer. Let’s dive into it.

Apple has found its golden egg hen

Steve Jobs co-founded Apple in 1976, but it wasn’t until the company invented the iPhone some 31 years later that the company’s trajectory reached the stratosphere. Today, the iPhone is Apple’s flagship product, surrounded by an ecosystem of apps and subscription services that generate ancillary revenue.

You can see below that Apple continues to grow its revenue and its margins are growing as well. It’s a fantastic combination for investors, seeing Apple rake in $111 billion in cash earnings over the past four quarters, more than most companies do in terms of sales.

AAPL free cash flow data by YCharts.

Many of its customers are locked into the ecosystem, updating their phones from time to time and driving monthly sales through Apple Music and Apple News, among several other services you can choose from. Smartphones have become a staple of society, and Apple’s business will likely thrive until that changes.

Put all that money to use

Shareholders benefit when a company generates so much profit that it doesn’t need it all; it usually means it ends up in your pockets. Apple gives back to investors through a dividend and stock buybacks. Apple has increased its dividend for 10 consecutive years. However, the company is emphasizing its stock buyback, spending a staggering $89 billion in the past year alone on the cause:

AAPL data on stock buybacks (TTM) by YCharts.

A company that buys back shares helps increase earnings per share (EPS) because profits are spread over fewer shares. Higher EPS helps support the share price, which further benefits shareholders. Apple has shrunk its share count from over 26 billion to less than 16 billion over the past decade, helping it grow BPA despite its massive size.

What does math look like?

So how can Apple stocks help you become a millionaire? Its dominant business and forward-looking growth make it an excellent choice to include in a diversified portfolio. Apple’s massive cash flow should continue to fuel share buybacks in the future. Ironically, investors should be celebrating a bear market because a lower stock price means Apple is getting more stock for its money.

As a result, analysts expect Apple’s EPS to grow an average of 12.5% ​​per year over the next three to five years. If the stock valuation remains constant, the stock price will double after about six years if these growth estimates are correct. It’s possible that the stock price will rise faster than the stock’s market capitalization, as Apple is constantly reducing the number of shares outstanding.

Apple may need to keep innovating to keep up its pace over the longer term. Still, unless something drastic happens, Apple’s cash cow business looks remarkably intact for the foreseeable future. The company’s rare combination of size and profitability means the stock can still help you build wealth if you give it enough time.

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Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions and recommends Apple. The Motley Fool recommends the following options: long calls $120 in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.