Apple added almost $40 billion to its cash and investments in its last fiscal year ending September 2012. However, only about $11.4 billion of it was generated in the US. In calendar 2013 Apple’s dividend of $10.60 per share will cost the company about $10 billion and another $3.3 billion is planned for stock buybacks. I believe that Apple could come up short in the amount of cash it generates in the US to cover the dividend and buyback. Apple does have about $38 billion in US cash so it can easily cover a projected $2.4 billion shortfall.
| ($ mil.) | Sept. '09 |
Sept. '10 |
Sept. '11 |
Sept. '12 |
Sept. '13 Est. |
| Cash | $5,263 |
$11,261 |
$9,815 |
$10,746 |
$55,106 |
| Short-term Inv. | $18,201 |
$14,359 |
$16,137 |
$18,383 |
$18,383 |
| Long-term Inv. | $10,528 |
$25,391 |
$55,618 |
$92,122 |
$92,122 |
| Total | $33,992 |
$51,011 |
$81,570 |
$121,251 |
$165,611 |
| $ Year over year growth | $17,019 |
$30,559 |
$39,681 |
$44,360 |
|
| % Year over year growth | 50% |
60% |
49% |
37% |
|
| % Overseas | 51% |
60% |
67% |
68% |
70% |
| Tax rate | 35% |
35% |
35% |
35% |
35% |
| US | $16,592 |
$20,211 |
$27,270 |
$38,651 |
$49,683 |
| Net Overseas | $11,310 |
$20,020 |
$35,295 |
$53,690 |
$75,353 |
| Net after tax | $27,902 |
$40,231 |
$62,565 |
$92,341 |
$125,036 |
| Growth | |||||
| US | $3,619 |
$7,059 |
$11,381 |
$11,032 |
|
| International | $8,710 |
$15,275 |
$18,395 |
$21,663 |
|
| Dividends | ($10,114) |
||||
| Buyback | ($3,333) |
||||
| Net US cash | ($2,415) |
Since only US based cash can be used for dividends and stock buybacks it could put a limit on how much Apple can increase these programs. There are two factors in Apple’s favor. The first is that as the company’s US revenue and profits increase it will generate more cash in the US but that shouldn’t be a significant amount more than what it is spending on these programs now.
The second is that Apple has about $38 billon in cash and investments already in the US. This could be used to fund higher dividends or a larger buyback. These are tempered if Apple decides to fund a major portion of a manufacturing facility in the US and especially if they help a company such as TSMC build a multi-billion semiconductor fab.
The wildcard is a change to tax policy so that cash brought back to the US is taxed at lower rate than the 35% offset by what taxes have been paid overseas, but these tend to be minimal compared to the US rate.
Overall, I do believe that Apple will increase its dividend on a fairly regular basis as I believe management took a multi-year timeframe into account when they set the initial payment. The key question is how much larger could it get.
Disclosure: My family and I own Apple shares
