“There has been a lot of discussion regarding Apple’s situation with Donald Trump as President-Elect of the United States,” Bill Maurer writes for Seeking Alpha. “With the potential for a tax holiday to bring home foreign funds at a low rate, the company that has well over $200 billion in cash outside the US would likely benefit most. Last week, a fellow SA contributor suggested that Apple would enact a large buyback, and while I agree a buyback would occur, I don’t think we’d see one to this extent.”
“Apple’s capital return plan started in fiscal 2012, and the current program is aimed to return $250 billion to shareholders, of which $186.23 billion had been returned at the end of fiscal 2016. Apple has bought back $133 billion worth of shares under the current $175 billion buyback program, which has reduced the share count by nearly 19% over the past four fiscal years,” Maurer writes. “Should the company be able to repatriate more than $175 billion as the author above suggested, I don’t see the company coming out and instantly announcing a massive buyback. If that were the case, it is likely that Apple shares would jump on the news, forcing the company to pay more for shares and making the program less successful.”
“If Apple were to go the buyback route, I think the company would use the same strategy as it has all along, mostly being slow and steady,” Maurer writes. “With tens of billions of cash available, Apple could use the money to provide a line in the sand, say stepping in to support the stock when it hits a certain level (for example $100 a share).”
“One area where I think Apple would look to use some of this repatriated cash is the dividend. I don’t see a big one-time payout, but I could see the company hiking the dividend by a sizable amount and keeping a large chunk of cash in reserve to maintain this payout and further increases,” Maurer writes. “Finally, while I don’t see Apple throwing tens of billions behind an acquisition like a Tesla Motors or Netflix, I could see the company making smaller more targeted acquisitions…”
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MacDailyNews Take: Apple should be paying a strong dividend to encourage investors and reward shareholders, since the market consistently undervalues the stock by a large margin.
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