With the tax changes, Munster believes that Apple will repatriate $214B of its overseas cash at the one-time 15.5% tax rate. However, he believes that Apple’s merger and acquisition strategy is “likely to remain unchanged” by continuing to target technology acquisitions under $1 billion.
Other predictions include Apple bolstering its share buyback by $69B and bumping its dividend to 15% (a 5 point increase from the previously announced 10% bump).
Munster forecasts that Apple will retain its debt around $100B and make an announcement on these financial details in April next year.
Even though Apple will be spending a good portion of its repatriated cash on its increased share buyback and dividends, Munster says that the company is likely to retain a cash balance of about the same $270B over the coming years.
It’s unrealistic to assume that Apple will reduce its cash balance from $269B to $150B. Keep in mind our $150B cash estimate reflects the total cost of the buyback and dividend. In practice, the cost of those two programs will be spread out over 3-4 years, and Apple will continue to generate cash during that time. To give a sense of Apple’s current cash generation, the company generated $31B in cash from Sep-16 to Sep-17. If we assume $3oB in annual cash generation for the next 4 years implies a 2022 cash ending balance of $270B, unchanged from the $269B today.
Here are a few specifics on Apple’s current financials via Loup Ventures:
- The company has $104B in debt carrying an interest rate of 2.2%.
- Apple has paid out $166B in buybacks and $61B in dividends since 2012.
- The $69B buyback will likely be executed over a 3 year period.
- The 15% annual dividend increase will cost Apple about $10B over a 4 year period.