Apple encouraged to borrow against its $94B in overseas cash for greater flexibility

Posted:
in AAPL Investors edited January 2014
Apple should borrow money at low costs against its significant overseas cash position to avoid a tax hit when repatriating that cash, one analyst believes.

Ben A. Reitzes with Barclays believe it's time Apple strongly consider "tapping the debt markets," which would allow it to borrow against the $94 billion in cash the company has overseas, $40.4 billion of which is untaxed.

Barclays


"This way, Apple could maintain flexibility to make acquisitions and not incur a tax hit for repatriation ??all for very low current borrowing costs," Reitzes said in a note to investors on Tuesday. "As a result, we calculate that Apple could easily double the size of its current three-year capital return plan, among the many options it has."

If Apple were to borrow, Barclays estimates that the company could double its level of capital returns. Doing so could allow Apple to boost its dividend to more than $14.75, giving it a 3.75 percent yield that would be comparable to other blue chip companies.Borrowing at low rates against its overseas cash could allow Apple to "maintain flexibility to make acquisitions and not incur a tax hit for repatriation," Ben A. Reitzes believes.

Reitzes believes AAPL stock could reach the $575 level if its dividend yield were in line with "bellwethers" such as Cisco. He also said the company has the capacity to increase its share buyback program by $30 billion over three years, up from its current $10 billion share repurchase program.

The analysis assumes that Apple would want to maintain at least $10 billion per year in domestic cash. That money could be reserved for mergers and acquisitions, as well as general corporate purposes.

Asymco
Apple's growing cash, cash equivalents, and securities, via Asymco.


At the end of last quarter, Apple's growing cash hoard had reached $137 billion. Particular attention has been given to the company's $40.4 billion in untaxed overseas cash, with calls from the U.S. for the American company to repatriate that money and pay taxes on it.Apple had $137 billion in cash as of last quarter, with most of it held overseas and more than $40 billion untaxed.

Last week, The Wall Street Journal did an analysis of 60 large U.S. corporations, and found that they collectively held $166 billion in untaxed offshore earnings as of 2012. Apple's $40.4 billion represented nearly a quarter of that from just one company.

Market watchers expect that Apple will soon announce what it plans to do with its growing cash and reserves.

It was about a year ago that Apple announced it would begin a quarterly dividend along with a stock buyback plan. With the company's annual shareholder meeting and a lawsuit from hedge fund manager David Einhorn now behind Apple, analyst Brian White of Topeka Capital Markets said this week he believes the timing would be right for the company to announce its next move.
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Comments

  • Reply 1 of 51
    jgutherjguther Posts: 73member
    When will AI stop publishing this kind of b*sh*t...
  • Reply 2 of 51
    jd_in_sbjd_in_sb Posts: 1,482member


    Borrowing sucks.

  • Reply 3 of 51
    umrk_labumrk_lab Posts: 550member


    Planet Banking is so desesperate that Apple has no need for its services ....

  • Reply 4 of 51
    Or they could just, you know, pay their f*cking taxes.

    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.
  • Reply 5 of 51
    Why are all these people pushing Apple to get into debt? Even my kid would say that it is stupid! I hate this American mentality of living on borrowed monies! This country got here because of this!
  • Reply 6 of 51
    chandra69chandra69 Posts: 638member

    Quote:


    When will AI stop publishing this kind of b*sh*t...



    What is wrong in publishing this?  Do you expect AI to publish only about iPhone, Mac, Pro and Air?


    Anything related to Apple, Apple competitors and former employees can be posted here!


     


    A real Apple Fanboy would want to know about all these!  

  • Reply 7 of 51
    sflocalsflocal Posts: 4,339member


    Borrowing for WHAT?!!  They have $50B in cash sitting here!  How much more will they need to borrow against using their overseas cash?  Are they planning on buying Google or something?



    AI is just getting downright pathetic with these nonsense postings.

  • Reply 8 of 51
    tallest skiltallest skil Posts: 43,399member


    Originally Posted by BlueDjinn View Post

    Or they could just, you know, pay their f*cking taxes.



    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?



    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.


     


    No, let's not make this about the taxes they've already paid.

  • Reply 9 of 51
    philboogiephilboogie Posts: 7,435member
    bluedjinn wrote: »
    Or they could just, you know, pay their f*cking taxes.

    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

    I think they pay their bills from oversees countries with the money that is in that specific country. Makes sense to me, otherwise they would need to pay taxes to bring all the money home and then spend it on foreign expenditures. What am I missing from your post? Patriotic, ok, but why state they should pay their taxes? They are paying their taxes.
  • Reply 10 of 51
    drewys808drewys808 Posts: 536member

    Quote:

    Originally Posted by Chandra69 View Post


    What is wrong in publishing this?  Do you expect AI to publish only about iPhone, Mac, Pro and Air?


    Anything related to Apple, Apple competitors and former employees can be posted here!


     


    A real Apple Fanboy would want to know about all these!  





    We should all be skeptical of these analyst "ideas".


    But IMO borrowing in this specific situation is a better idea than issuing preferred stock, fwiw.

  • Reply 11 of 51
    robogoborobogobo Posts: 378member
    bluedjinn wrote: »
    Or they could just, you know, pay their f*cking taxes.

    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.
    Or you could, you know, make sure you know what you're talking about before spouting tripe. They aren't evading taxes. It's not like they're hiding earnings in an offshore account. That money was foreign earned and taxes were paid where it was earned.
  • Reply 12 of 51
    charlitunacharlituna Posts: 7,197member

    Quote:

    Originally Posted by jguther View Post



    When will AI stop publishing this kind of b*sh*t...


     


    when it stops getting page hits

  • Reply 13 of 51
    hill60hill60 Posts: 6,989member


    Why am I not surprised that someone who works for a bank is suggesting Apple borrows from a bank.


     


    Be a nice chunk of commission in signing up a $40 Billion loan.


     


    What next?


     


    Apple should spend their money on food says McDonalds worker.


     


    Apple should spend their money on cars says Ford worker.


     


    etc

  • Reply 14 of 51

    Quote:

    Originally Posted by PhilBoogie View Post





    I think they pay their bills from oversees countries with the money that is in that specific country. Makes sense to me, otherwise they would need to pay taxes to bring all the money home and then spend it on foreign expenditures. What am I missing from your post? Patriotic, ok, but why state they should pay their taxes? They are paying their taxes.


     


    The point is there are rules and established laws regarding returning the cash to the US (for better or worse is irrelevant). Companies (not just Apple) whine over wanting this 'holiday' to do it. To that I say tough &#^$. You want the money here, follow the rules, if not ok fine just use it where it is. Them's the rules and that simple. It has nothing to do with being 'patriotic', what's in Apple's supposed 'best interest' or anything else that people dream up related to the stock. 

  • Reply 15 of 51
    jragostajragosta Posts: 10,473member
    bluedjinn wrote: »
    Or they could just, you know, pay their f*cking taxes.

    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?

    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.

    My guess is that you don't have any idea what you're talking about. Oh, wait. It's not a guess - it's obvious.

    Apple paid their taxes. In fact, last year, Apple paid 2.5% of ALL US corporate income tax. There is no US tax owed on money that is earned overseas - according to the US tax code and essentially every country on the planet. If the US government started taxing income earned in other countries, it would trigger a massive global trade war-they have no right to do that.

    Now, if you have any evidence that Apple has not paid the taxes that they're required to pay, please feel free to present it. Otherwise, in the future, please learn about a topic before spouting off.
  • Reply 16 of 51
    Apple survived the tough times in the past with no debt.

    Debt [is] simply not sustainable for government or corporations.

    Cash is King.

    EDIT: politics removed.
  • Reply 17 of 51
    fahlmanfahlman Posts: 693member

    Quote:

    Originally Posted by BlueDjinn View Post



    Or they could just, you know, pay their f*cking taxes.



    On top of it being the right thing to do, think of the PR/image boost of a huge global corporation actually acting like a patriotic American citizen should?



    My guess is that they'd see quite a sales spike that would counteract a chunk of the extra taxes that they'd be paying.


    Apple has paid their f*cking taxes in the country where that money was generated. It's not "the right thing to do". Apple, as you stated, is a global company. They are not obligated to bring money generated in a country outside of the United States back in to the United States. What don't you understand about that?

  • Reply 18 of 51


    Paying taxes that can be "legally avoided" would leave Apple open to legal action by shareholders for unnecessarily incurring expenses (taxes).Has there ever been a business that paid taxes that were not require to be paid?

  • Reply 19 of 51
    mstonemstone Posts: 11,510member

    Quote:

    Originally Posted by yourmama View Post



    Apple survived the tough times in the past with no debt.



    Debt [is] simply not sustainable for government or corporations.



    Cash is King.



    EDIT: politics removed.


    Isn't Apple already in debt? They have 402.32B in liabilities (market capitalization)

  • Reply 20 of 51


    Paying taxes that can be "legally avoided" would leave Apple open to legal action by shareholders for unnecessarily incurring expenses (taxes).Has there ever been a business that paid taxes that were not require to be paid?

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