“In a press release about accelerating the company’s U.S. investments Apple announced that it would pay an estimated $38 billion in repatriation taxes on its overseas cash. It is not surprising that the company will be bringing back a lot of the $252.3 billion that it had overseas as of September 2017 since it could be used for operations, acquisitions, dividends or buying back stock,” Chuck Jones writes for Forbes. “When you go through where Apple could spend an estimated net of $207 billion, it will probably be applied to stock buybacks.”
“The key to paying dividends and buying back stock is that U.S. cash has to be used,” Jones writes. “Even if debt is raised in other currencies for these purposes the repayment still has to be with U.S. cash.”
“Since Apple hasn’t shown an inclination for large acquisitions, I believe very little, if any, of the $207 billion will be used for them,” Jones writes. “I believe Apple will increase the dividend by at least 11% and maybe up to 20% but may be reluctant to go much higher even though it could… Stock buybacks is probably where most of it is used.”
Read more in the full article here.
MacDailyNews Take: Yes, we agree. Buybacks also mitigate dilution via RSUs and stock options.
Think buybacks and dividends, not major acquisitions. — MacDailyNews, January 5, 2018
SEE ALSO:
What Apple could buy with all its cash – January 19, 2018
Here’s what Wall Street thinks of Apple’s cash repatriation plan – January 18, 2018
UBS: Buy Apple as company could acquire more than $120 billion of its stock in two years – January 8, 2018
GBH: Apple likely to repatriate $200 billion of its $252 billion foreign cash hoard – January 5, 2018
Although Apple may have 207 Billion coming back you have to take into account they have in the past borrowed over 100 Billion to use for Dividends and stock purchases that has to be repaid. Yes they have years to repay that money, but it does reduce the amount of real unattached money on hand.
Increased dividends and buybacks seem very likely.
Buying a large company which everybody has heard of seems very unlikely.
Investing in component suppliers, hardware innovators and paying up front for massive numbers of components is certain to continue.
The conventional wisdom is that companies shouldn’t maintain large amounts of cash. As Apple generally defies conventional wisdom, I wouldn’t expect Apple to be too keen on hurriedly spending it’s mountain of cash.
With the economic, political and environmental future of the world being highly uncertain over the next few years, having the benefit of large cash reserves could offer Apple a huge advantage if times got tough.
I guess when you’re a profit machine, $200 billion in cash is nothing. They figure they’ll come close to making it all back in a few years, anyway.
Just hope they did their due diligence and explored all of the things they could’ve bought with that hoard before concluding that none of it would’ve made Apple a better company.
Last quarter, Apple reported a revenue of well over $50 billion and made profits well in excess of $10 billion.
Whatever they do with the money they’ve already earned, they will still need to do something with next year’s profits as well.
Many commentators note that Apple has a certain amount of money in it’s pocket and then they look around to see what sort of company could be bought for that sort of money. That’s entirely the wrong way to look at it because buying a well known company usually turns out to be a poor investment as much of the original value dissipates when the two companies start merging.
Well, whenever Amazon buys a company it immediately becomes additive with no dissipation at all and the stock just keeps endlessly climbing.
So far, nothing else is working for Apple. Buybacks, dividends and reserve cash have done almost nothing for Apple’s P/E. Out of all the major tech stocks, Apple’s P/E is the lowest and well below the S&P 500 tech stocks in general. Apple needs to at least try to acquire a major company and see if that strategy works for them. Apple is the only major tech company looking at multiple downgrades this quarter, which is supposed to be their best quarter. With a mountain of cash practically sitting in their lap, Apple stock is looking as sick as any other struggling, cash-poor company. Go figure.
Wall Street doesn’t value stocks based on cash in hand, but only future earnings and Apple is being said to have zero future growth. Maybe only a large acquisition can change Wall Street’s view of Apple.
Wall Street has concluded that Apple has no growth prospects every year since the iPod started to be a big success. Despite the experts in Wall Street, Apple has grown exponentially since then and yet those same people still keep saying that Apple has peaked.
Apple – the company which has peaked for fifteen successive years and is perpetually going to fail next year.
CONSUMER DEMAND FUELS HIRING AND HAS NOT CHANGED WITH REPATRIATION. THE TOP 1/10% OWN 80% OF ALL STOCKS WHICH DOES NOT AFFECT THE ECONOMY; THATS 400 FAMILIES. IF THEY BUY 400 iPHONES IT DOES NOTHING FOR THE ECONOMY AND CORPORATIONS ARE NOT OBLIGATED TO PAY HIGHER WAGES. BUT IF THE TOP TAX RATE WAS HIGHER THE US COULD INVEST IN INFRASTRUCTURE AND ALSO COMPANIES TO WOULD PAY WORKERS MORE TO AVOID GETTING TAXED OK THAT INCOME, THUS CREATING A VIRTUOS CYCLE OF INCREASED SUPPLY/DEMAND.
Jimmy Jimmy – You are making too much sense. As you will note, making sense and being rational means nothing to most of the people here and close to 50% of the nation. Now bring up Hillary and Benghazi or the stupidity of Tim Cook and you will have far more people marching in goose step behind you.
I’m pretty conservative when it comes to corporate cash management. Dividends should be paid out of the period’s earnings, just like performance bonuses. I’m also against borrowing money to pay. out dividends. That is like Mayor Lindsey of NY City years ago borrowing Long term to pay current expenses (like salaries for police, firemen and teachers)
We have learned that Apple can make financing for factory capacity or machinery – getting the needed production and having those funds returned in the future. A far better investment than dividends.
We have also learned that business is a cycle and recessions can hit. Apple needs a strong cash position to not only continue at a strong pace, but also ensure critical suppliers continue.