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

AppleInsiderAppleInsider
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in AAPL Investors
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.

Comments

  • Reply 1 of 14
    red oakred oak Posts: 1,088member
    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  
  • Reply 2 of 14
    BalazsVagvolgyiBalazsVagvolgyi Posts: 7member
    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.
  • Reply 3 of 14
    karmadavekarmadave Posts: 369member
    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...
    netmage2old4funred oakviclauyycanantksundaramradarthekatquench
  • Reply 4 of 14
    volcanvolcan Posts: 1,799member
    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.
    edited December 2017
  • Reply 5 of 14
    eriamjheriamjh Posts: 1,644member
    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.   
  • Reply 6 of 14
    SpamSandwichSpamSandwich Posts: 33,407member
    eriamjh said:
    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.   
    Who knows what other acts of political blackmail will be coming out of the EU in 2018? Apple may have to keep a little extra in the bank to cover unexpected actions.
    entropys
  • Reply 7 of 14
    NY1822NY1822 Posts: 621member
    buy LYV
  • Reply 8 of 14
    gmgravytraingmgravytrain Posts: 882member
    It would be nice if Apple could manage a 2% dividend yield which now sits at 1.44%. I don't think that would be asking too much if Apple doesn't want to acquire any worthwhile companies. As a retiree, I depend upon my Apple dividends to pay my house utilities and other odds and ends. A larger dividend would definitely be useful to me. I can't count on Apple's share price rising like any of the FANG stocks. Wall Street is just too flaky when it comes to valuing companies. Netflix with a P/E of 190 and Apple with a P/E of 19 is just too hard for me to understand. Stock buybacks are nice but I prefer the dividends because I can actually spend them.
  • Reply 9 of 14
    hammeroftruthhammeroftruth Posts: 1,309member
    BalazsVagvolgyi said:
    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.
    Yeah good luck with that happening. That would be sane and rational. Instead Apple will grant more stock options for the executives and probably give more royalties to get more content for their streaming services. 

    They would get more mileage with that cash by spreading around the retail and Applecare employees. They are the ones who take the brunt of abuse from customers anytime Apple does anything wrong. Lately, that's a lot. 
  • Reply 10 of 14
    SpamSandwichSpamSandwich Posts: 33,407member
    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.
    Yeah good luck with that happening. That would be sane and rational. Instead Apple will grant more stock options for the executives and probably give more royalties to get more content for their streaming services. 

    They would get more mileage with that cash by spreading around the retail and Applecare employees. They are the ones who take the brunt of abuse from customers anytime Apple does anything wrong. Lately, that's a lot. 
    Nothing prevents Apple employees from buying AAPL stock. Their compensation for working at Apple is their salary and whatever additional benefits they negotiated. Apple doesn’t owe them a thing beyond that.
    edited December 2017 radarthekat
  • Reply 11 of 14
    billearlbillearl Posts: 10member
    This is exactly what economists said would happen when profitable corporations got tax cuts - share buybacks and dividends. At best, that's trickle-down economics. At worst, it's simply making the rich richer.
  • Reply 12 of 14
    jSnivelyjSnively Posts: 429administrator
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  • Reply 13 of 14
    radarthekatradarthekat Posts: 3,842moderator
    billearl said:
    This is exactly what economists said would happen when profitable corporations got tax cuts - share buybacks and dividends. At best, that's trickle-down economics. At worst, it's simply making the rich richer.
    Why characterize making the rich richer as a worst case outcome?  The rich create a lot of jobs.  You’re not one of those “what have you done for me lately” types, are you?  
    entropys
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