I’m in with the “why does Apple continue to buy their own stock” group. It made more sense back in 2008 when the entire market was in shambles, but not now.
Not to trash Apple -- but I am very suspicious of any company that borrows money in order to pay dividends or other types of payments to stock holders... Most financial advisors agree it is, generally speaking, a highly suspicious strategy often used to artificially boost a stock price.
Generally, Dividends should be paid from earnings -- not borrowings.
That being said: Not knowing Apple's overall investment strategy -- and knowing that they don't tend to do stupid things, I am inclined to give them the benefit of the doubt.
From what I understand, it’s much better for them to leverage ridiculously low interest rates than to take a massive tax hit trying to repatriate the money for dividend payouts.
Again, Apple does NOT pay dividends out of borrowed money. Stock buybacks are done with borrowed money.
They have the cash to pay off all that debt, it's just sitting in foreign accounts.
Common misconception: the foreign earnings are not actually held outside the United States. It's all in banks in Manhattan. Apple is just restricted from actively using that money for U.S. operations.
Sorry, but you're posting is not even close to being true nor accurate! if the funds were in Manhattan banks they would have to have ben repatriated and the appropriate taxes paid on the repatriated profits. Refer to the Ireland tax issue (mentioned here on AI a few days ago) where Apple moved the money in Ireland to another (non USA) country to avoid the possible EU based tax hit.
They have the cash to pay off all that debt, it's just sitting in foreign accounts.
Common misconception: the foreign earnings are not actually held outside the United States. It's all in banks in Manhattan. Apple is just restricted from actively using that money for U.S. operations.
Sorry, but you're posting is not even close to being true nor accurate! if the funds were in Manhattan banks they would have to have ben repatriated and the appropriate taxes paid on the repatriated profits. Refer to the Ireland tax issue (mentioned here on AI a few days ago) where Apple moved the money in Ireland to another (non USA) country to avoid the possible EU based tax hit.
Foreign earnings not being repatriated doesn't mean that the funds aren't held in U.S. banks or invested in U.S.-based instruments. It means that the foreign subsidiary which made those earnings hasn't remitted the funds to the parent company. That subsidiary can hold the funds in various ways - to include in U.S. banks or as bonds issued by U.S. companies or the U.S. government.
Repatriation has to do with which corporation holds funds, not with where or how those funds are held. Just as you generally aren't yet reponsible for taxes on earnings which a company you own (i.e. through owning shares in it) hasn't remitted to you (e.g. through paying you a dividend) yet, a parent U.S. company often isn't yet responsible for taxes on earnings which a foreign subsidiary it owns hasn't remitted to it yet.
Not to trash Apple -- but I am very suspicious of any company that borrows money in order to pay dividends or other types of payments to stock holders... Most financial advisors agree it is, generally speaking, a highly suspicious strategy often used to artificially boost a stock price.
Generally, Dividends should be paid from earnings -- not borrowings.
That being said: Not knowing Apple's overall investment strategy -- and knowing that they don't tend to do stupid things, I am inclined to give them the benefit of the doubt.
Apple has stated very clearly that theY do NOT pay dividends out of borrowed money. All dividends are paid for out of cash generated in the USA. Only stock buybacks are bought using debt. I just don’t like stock buybacks at all. Despite what some think, there has never been any direct evidence that they actually lead to any permanent increase in the share price, despite the theoretical reasons why it should.
Not to trash Apple -- but I am very suspicious of any company that borrows money in order to pay dividends or other types of payments to stock holders... Most financial advisors agree it is, generally speaking, a highly suspicious strategy often used to artificially boost a stock price.
Generally, Dividends should be paid from earnings -- not borrowings.
That being said: Not knowing Apple's overall investment strategy -- and knowing that they don't tend to do stupid things, I am inclined to give them the benefit of the doubt.
From what I understand, it’s much better for them to leverage ridiculously low interest rates than to take a massive tax hit trying to repatriate the money for dividend payouts.
Again, Apple does NOT pay dividends out of borrowed money. Stock buybacks are done with borrowed money.
Apple routinely lists payment of dividends as one of the intended uses of the proceeds (from debt issuances) in the prospectuses that it files.
They have never used any money from debt for dividends. Never. And Cook has stated this several times. His statements, as an executive of the company is equivalent to a legal document. What they do, is to free up cash earned here, when they issue debt for buybacks. That cash is then used for dividends, only if it’s earned here, and is part of net and cash flow.
Not to trash Apple -- but I am very suspicious of any company that borrows money in order to pay dividends or other types of payments to stock holders... Most financial advisors agree it is, generally speaking, a highly suspicious strategy often used to artificially boost a stock price.
Generally, Dividends should be paid from earnings -- not borrowings.
That being said: Not knowing Apple's overall investment strategy -- and knowing that they don't tend to do stupid things, I am inclined to give them the benefit of the doubt.
Apple has stated very clearly that theY do NOT pay dividends out of borrowed money. All dividends are paid for out of cash generated in the USA. Only stock buybacks are bought using debt. I just don’t like stock buybacks at all. Despite what some think, there has never been any direct evidence that they actually lead to any permanent increase in the share price, despite the theoretical reasons why it should.
Not to trash Apple -- but I am very suspicious of any company that borrows money in order to pay dividends or other types of payments to stock holders... Most financial advisors agree it is, generally speaking, a highly suspicious strategy often used to artificially boost a stock price.
Generally, Dividends should be paid from earnings -- not borrowings.
That being said: Not knowing Apple's overall investment strategy -- and knowing that they don't tend to do stupid things, I am inclined to give them the benefit of the doubt.
From what I understand, it’s much better for them to leverage ridiculously low interest rates than to take a massive tax hit trying to repatriate the money for dividend payouts.
Again, Apple does NOT pay dividends out of borrowed money. Stock buybacks are done with borrowed money.
Apple routinely lists payment of dividends as one of the intended uses of the proceeds (from debt issuances) in the prospectuses that it files.
They have never used any money from debt for dividends. Never. And Cook has stated this several times. His statements, as an executive of the company is equivalent to a legal document. What they do, is to free up cash earned here, when they issue debt for buybacks. That cash is then used for dividends, only if it’s earned here, and is part of net and cash flow.
Cash is rather fungible, so yeah... generally speaking you can consider a particular source of cash flow as either being used to pay for something in particular or as freeing up other cash which is used to pay for that something. (To be clear, as I'm not sure whether you're suggesting otherwise, the proceeds from Apple's term debt issuances are also part of its cash flow as are the net proceeds from its commercial paper operations.)
But when it comes to what Apple says on the matter... as I indicated, it says something different (from what you're saying) in its SEC filings - both in its quarterly and annual reports, and in prospectuses related to its debt issuances.
This may explain Apple's borrowing related to dividends and stock buybacks: "Apple said in an August conference call that $246 billion of cash, 94 percent of its total, was held outside the U.S."
So, while they are sitting on a mountain of cash, they can't get to it without paying (high) taxes on it. So they borrow money to pay stock holders with dividends and buybacks.
They have the cash to pay off all that debt, it's just sitting in foreign accounts.
Common misconception: the foreign earnings are not actually held outside the United States. It's all in banks in Manhattan. Apple is just restricted from actively using that money for U.S. operations.
Sorry, but you're posting is not even close to being true nor accurate! if the funds were in Manhattan banks they would have to have ben repatriated and the appropriate taxes paid on the repatriated profits. Refer to the Ireland tax issue (mentioned here on AI a few days ago) where Apple moved the money in Ireland to another (non USA) country to avoid the possible EU based tax hit.
Foreign earnings not being repatriated doesn't mean that the funds aren't held in U.S. banks or invested in U.S.-based instruments. It means that the foreign subsidiary which made those earnings hasn't remitted the funds to the parent company. That subsidiary can hold the funds in various ways - to include in U.S. banks or as bonds issued by U.S. companies or the U.S. government.
Repatriation has to do with which corporation holds funds, not with where or how those funds are held. Just as you generally aren't yet reponsible for taxes on earnings which a company you own (i.e. through owning shares in it) hasn't remitted to you (e.g. through paying you a dividend) yet, a parent U.S. company often isn't yet responsible for taxes on earnings which a foreign subsidiary it owns hasn't remitted to it yet.
All funds held in US banks are subject to IRS taxation regulations, no exceptions.
They have the cash to pay off all that debt, it's just sitting in foreign accounts.
Common misconception: the foreign earnings are not actually held outside the United States. It's all in banks in Manhattan. Apple is just restricted from actively using that money for U.S. operations.
Sorry, but you're posting is not even close to being true nor accurate! if the funds were in Manhattan banks they would have to have ben repatriated and the appropriate taxes paid on the repatriated profits. Refer to the Ireland tax issue (mentioned here on AI a few days ago) where Apple moved the money in Ireland to another (non USA) country to avoid the possible EU based tax hit.
Foreign earnings not being repatriated doesn't mean that the funds aren't held in U.S. banks or invested in U.S.-based instruments. It means that the foreign subsidiary which made those earnings hasn't remitted the funds to the parent company. That subsidiary can hold the funds in various ways - to include in U.S. banks or as bonds issued by U.S. companies or the U.S. government.
Repatriation has to do with which corporation holds funds, not with where or how those funds are held. Just as you generally aren't yet reponsible for taxes on earnings which a company you own (i.e. through owning shares in it) hasn't remitted to you (e.g. through paying you a dividend) yet, a parent U.S. company often isn't yet responsible for taxes on earnings which a foreign subsidiary it owns hasn't remitted to it yet.
All funds held in US banks are subject to IRS taxation regulations, no exceptions.
I don't think anyone here is suggesting otherwise. That's not the issue. The issue is whether foreign earnings become taxable (currently) just because they are held in U.S. banks or U.S.-based instruments. They don't.
Again, I think you may be misunderstanding what repatriation means, or what holding money offshore means in this context. It doesn't necessarily mean that such money is held in foreign banks or in foreign instruments. It means that the foreign corporation which made that money hasn't distributed it to the U.S. parent company (or U.S. taxpayer) yet. That foreign corporation can hold the money in a number of different ways - to include in U.S. banks or U.S.-based instruments.
When we talk, in this context, about funds being held in, e.g. Ireland, we don't necessarily mean that those funds are parked in banks in Ireland. We mean that those funds - those foreign earnings - are held by Irish corporations rather than by U.S. corporations. U.S. income taxes generally aren't due until those controlled foreign corporations distribute those foreign earnings to U.S. corporations. There are exceptions, of course. Subpart F income (e.g. interest income) is taxable in the U.S. when it is earned (by the controlled foreign corporation) whether it is distributed to the U.S. taxpayer or not. But ordinary income made by controlled foreign corporations generally is not and does not become so just because it is, e.g., used to buy U.S. Treasuries or deposited in U.S. banks. What makes it taxable (currently) is its being distributed to the U.S. taxpayer.
This may explain Apple's borrowing related to dividends and stock buybacks: "Apple said in an August conference call that $246 billion of cash, 94 percent of its total, was held outside the U.S."
So, while they are sitting on a mountain of cash, they can't get to it without paying (high) taxes on it. So they borrow money to pay stock holders with dividends and buybacks.
As far as borrowing against it for stock purchases it's a essentially a zero-sum expense other than the burned stock itself. The cost of borrowing after factoring in inflation ends up zero to negative.
Comments
Repatriation has to do with which corporation holds funds, not with where or how those funds are held. Just as you generally aren't yet reponsible for taxes on earnings which a company you own (i.e. through owning shares in it) hasn't remitted to you (e.g. through paying you a dividend) yet, a parent U.S. company often isn't yet responsible for taxes on earnings which a foreign subsidiary it owns hasn't remitted to it yet.
But when it comes to what Apple says on the matter... as I indicated, it says something different (from what you're saying) in its SEC filings - both in its quarterly and annual reports, and in prospectuses related to its debt issuances.
"Apple said in an August conference call that $246 billion of cash, 94 percent of its total, was held outside the U.S."
So, while they are sitting on a mountain of cash, they can't get to it without paying (high) taxes on it. So they borrow money to pay stock holders with dividends and buybacks.
It is from this article in CNBC:
https://www.cnbc.com/2017/11/07/oracle-joins-apple-in-support-of-tax-repatriation.html
Again, I think you may be misunderstanding what repatriation means, or what holding money offshore means in this context. It doesn't necessarily mean that such money is held in foreign banks or in foreign instruments. It means that the foreign corporation which made that money hasn't distributed it to the U.S. parent company (or U.S. taxpayer) yet. That foreign corporation can hold the money in a number of different ways - to include in U.S. banks or U.S.-based instruments.
When we talk, in this context, about funds being held in, e.g. Ireland, we don't necessarily mean that those funds are parked in banks in Ireland. We mean that those funds - those foreign earnings - are held by Irish corporations rather than by U.S. corporations. U.S. income taxes generally aren't due until those controlled foreign corporations distribute those foreign earnings to U.S. corporations. There are exceptions, of course. Subpart F income (e.g. interest income) is taxable in the U.S. when it is earned (by the controlled foreign corporation) whether it is distributed to the U.S. taxpayer or not. But ordinary income made by controlled foreign corporations generally is not and does not become so just because it is, e.g., used to buy U.S. Treasuries or deposited in U.S. banks. What makes it taxable (currently) is its being distributed to the U.S. taxpayer.
As far as borrowing against it for stock purchases it's a essentially a zero-sum expense other than the burned stock itself. The cost of borrowing after factoring in inflation ends up zero to negative.
If you're interested in finding out how that "foreign-held cash" is already at work here in the US contrary to popular notion:
https://www.americanprogress.org/issues/economy/reports/2014/01/09/81681/offshore-corporate-profits-the-only-thing-trapped-is-tax-revenue/