It’s no secret that Apple currently has more cash that it knows what to do with. As of the company’s most recent earnings report, Apple now finds itself sitting on approximately $269 billion in cash and other securities. But as it turns out, Apple can’t enjoy or use most of it because the vast majority of it (~ $252 billion) is sitting overseas, with Apple naturally being reluctant to bring it back to the United States as it’d be subject to a high corporate income tax rate. Indeed, the aforementioned tax rate is why Apple has opted to fund its dividend and stock buyback program via the issuance of debt with extremely low interest rates.
Looking ahead, though, the recently passed Republican tax plan may see Apple finally bring back a sizable chunk of its overseas cash. As part of the new bill, Apple — and other large companies with vast cash holdings overseas — will be able to enjoy a one-time tax holiday wherein their profits abroad will only be subjected to 15.5% tax rate, a figure drastically lower than the previous rate of 35%. If Apple repatriates all of its overseas cash, its tax bill would be around $39 billion.
So now the question becomes: what will Apple do under the new tax plan? Tackling this topic, Gene Munster of Loup Ventures speculates that Apple will likely increase both its dividend and share buyback program.
We do anticipate Apple will increase its share buyback by $69B, which will be added to the $166B that Apple has already spent on share repurchases from Jun-12 to Sep-17. Additionally, we expect Apple will increase its annual dividend by 15%, higher than the 10% increase they announced in April of both 2017 and 2016. We believe Apple will maintain its debt level at the $104B…
Indeed, Apple has been aggressively been buying back its own shares for years now, while taking a more conservative approach with dividend increases. If Munster’s projection is accurate, Apple’s quarterly dividend may jump from $0.63 per share to $0.72 per share. As a point of interest, when Apple re-started issuing dividends in 2012, the going rate was about $0.37 per share.
Apple currently has $104 billion in debt — which is how it has funded its buyback and dividend program thus far — but Munster doesn’t believe Apple is going to pay it off ahead of schedule.
One interesting tidbit Munster brings to light is that Apple has “paid out $166B in buybacks and $61B in dividends since 2012.”