Gene Munster: Apple Could Increase Buybacks, Dividends After Tax Reform

Apple Inc. AAPL bulls are celebrating an anticipated one-time 15.5-percent repatriation tax rate, which could lend the tech giant more spending power.

The company could truly redefine itself, but some on the Street expect no major strategy shifts.

The Rating

Loup Ventures managing partner Gene Munster does not issue ratings or prices targets but remains bullish on Apple.

The Thesis

Munster predicts Apple will repatriate $214 billion of its $252 billion in foreign holdings — enough to buy Walt Disney Co DIS or Comcast Corporation CMCSA or three Tesla Inc TSLAs with change. Apple could pursue a major merger, but it probably won’t, he said.

“We don’t expect this cash will change Apple’s M&A philosophy, which will likely continue to be focused on sub-$1 billion technology acquisitions,” Munster said in a Thursday note.

Apple could also apply the sum to a $69-billion increase in its buyback program and a 15-percent increase in the annual dividend above the previously announced 10 percent, said Munster, who anticipates no application toward Apple’s $104 billion in debt.

The buyback and $10-billion dividend strategies are expected to be spread out over three or four years, meaning they would not seriously ding the company’s $269 billion cash balance.

Price Action

Apple was trading nearly flat at $175.06 at the time of publication. 

Related Links:

7 Things The US Could Do With Apple’s Strategically Avoided Taxes

Breaking Down What Lower Corporate Taxes Would Mean For Apple