Apple expected to increase stock buyback, grow dividend payments as result of tax reform

Analysts are predicting that Apple won't change its acquisitions strategy under tax reform allowing for cash repatriation from overseas, but instead will radically expand its stock buyback program, and give shareholders a dividend increase going forward.

According to an analysis published on Friday by Loup Ventures Gene Munster, Apple's acquisition strategy will remain focused on companies costing the company less than $1 billion, as it probably won't keep its cash hoard after any repatriation is complete.

Instead, Munster expects that Apple will increase its share buy-back program by around $69 billion spread across three or four years, growing the effort to $235 billion since 2012. In conjunction, Apple is expected that it will increase its annual dividend by 15 percent, rather than the 10 percent it delivered in April 2016, costing Apple $10 billion over four years.

Munster isn't expecting Apple to do anything regarding its debt offerings with the repatriated cash.

As of September, Apple has $17 billion cash on hand in the U.S., with $269 billion in assorted foreign countries. The tax reform package applied to repatriating that cash declares that Apple would have a tax liability of $30 billion, payable over eight years.

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14 Comments

red oak

said about 6 years ago

Apple increasing its buyback by $69 over three years ($23B per year) would be way too conservative. And, it would leave Apple's balance sheet over flowing with unused, unproductive cash

Not going to happen

BalazsVagvolgyi

said about 6 years ago

Apple should give the savings to their employees, instead of the investors. It's the people, who will eventually end up paying the costs of this tax cut, and not the investors. Increased salaries to all employees will really put the money where it belongs.

karmadave

said about 6 years ago

Public corporations have a responsibility to maximize shareholder value. Period. End of story. Employees are generally compensated based on merit and their ability to negotiate with employers. Why would anyone assume that corporations will transfer some of their tax savings to employees? Of course, some could chose to provide employee bonuses. But if repurchasing stock, acquiring companies, and/or paying dividends will better increase shareholder value they will do so. To do otherwise would be management malpractice. I'm actually in favor of reducing the corporate tax rate, but to assert that this will lead to higher employee pay is naive, at best, and cynical at worst...

volcan

said about 6 years ago

karmadave said:

I'm actually in favor of reducing the corporate tax rate, but to assert that this will lead to higher employee pay is naive, at best, and cynical at worst...

One scenario is that because we are already at full employment, corporations might use the additional tax savings to offer higher pay to prospective employees that they want to lure away from competitors. Or pay their best employees more to keep them from bailing to the competition.

There aren't many qualified prospects in the 4% unemployed since most of them are either totally unskilled, on opioids or both. So no, the tax reform is not going to create jobs.

eriamjh

said about 6 years ago

Apple’s dividend is a bit low compared to far less profitable companies. It should be upped to at least 3% and probably should be 4 or 5% while it still has the $200B in the bank.