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Could Apple Surprise Investors With a Massive Special Dividend?

Thursday, November 3, 2016 3:57
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apple-logoFrom Ian Wyatt: With $164 billion of cash, Apple Inc. (NASDAQ:AAPL) is the world’s richest company.

The company is also an up-and-coming favorite for dividend investors. Since 2012, the company increased the dividend by 10% per year.

CEO Tim Cook has embraced investors with a growing dividend and huge stock buyback program.

But our research indicates that the company could be on the verge of a huge special payout. That’s because after subtracting its debts, Apple has $164 billion of cash.

On a per share basis, that’s nearly $30 in cash per share.

If Apple were to pay this out, it could deliver a mind-blowing 32% one-time dividend. Now, I’m not expecting anything of that magnitude.

But it’s very possible that Apple will follow in the footsteps of Microsoft (NASDAQ: MSFT), which issued a $32 billion one-day payout in 2004.

Apple Special Dividend

And a one-time payout could dwarf Apple’s annual 2.5% dividend.

So, how would this work . . .  and how exactly has Apple amassed $164 billion in cash?

A little known company called Braeburn Capital is at the heart of Apple’s cash stash. Located in Reno, Nevada, Apple formed Braeburn as a subsidiary in 2006.

Braeburn is a company that was formed with the explicit goal of helping Apple sidestep state and federal taxes in the U.S. And they’ve been extremely successful.

Apple currently pays less than 10% in taxes, versus the 39% U.S. corporate tax rate.

The New York Times reports:

Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.

Braeburn has very effectively helped Apple navigate the current environment. But our research indicates that things could quickly change.

With government debt rapidly growing, there will be increased pressure on companies including Apple to bring cash back into the U.S. When they do that, these companies will be hit with a big tax bill.

Both Donald Trump and Hillary Clinton could open the door for a tax holiday, encouraging the repatriation of corporate profits. If that happens, we’re expecting a flurry of huge dividend payouts, including an Apple special dividend.

Apple shares fell $0.79 (-0.71%) to $110.80 in premarket trading Thursday. Year-to-date, AAPL has gained 6.01%, versus a 2.87% return in the benchmark S&P 500 during the same period.


This article is brought to you courtesy of Wyatt Investment Research.

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