During Apple's (NASDAQ:AAPL) first fiscal 2015 quarterly earnings call, Apple CEO Tim Cook said the company would update its capital return program when it reports Q2 results. So, what can investors expect from Apple's updated program in April? Probably a boost to both its authorized cash for share repurchases and a dividend increase. But is it also possible that Apple could announce a special dividend, or a large one-time sum in addition to its quarterly dividend payment?

Apple store. Image source: Apple

Apple's no-joke $178 billion cash hoard
Apple has a cash problem. Even as Apple has been paying out billions of dollars in dividends every quarter and repurchasing loads of its own shares, the tech giant's pile of cash continues to grow. So, what can Apple do? One of the quickest ways to make a dent in its cash hoard would be to pay a special dividend. But it's not as easy as it sounds.

The vast majority of Apple's $178 billion is held overseas -- $158 billion to be exact. For the tech giant to bring this cash back to the U.S., it would have to pay a 35% capital gain repatriation tax, a cost both Apple and its shareholders wouldn't be happy to pay. Further, even relying on domestic cash flow for a special dividend would be tough at Apple's current rate of spending on share repurchases and dividends. In the last 12 months alone, Apple has returned over $57 billion to investors. 

Without a tax holiday for Apple to bring home its foreign cash at a lower tax rate, Apple investors shouldn't expect a special dividend anytime soon. And all tax holidays are not created equal; the tax holiday would have to allow Apple to use its domestic cash on dividends.

A new proposed bill called the "Boxer Paul Invest in Transportation Act of 2015" (via Fortune) would, indeed, allow companies like Apple with large overseas income to get a five-year window in which they can pay just 6.5% tax on money they bring back to the U.S. The revenue generated from the cash brought home would fund the Highway Trust Fund, which goes toward bridge and road repair. But there is a huge caveat: The bill only permits cash to be used for certain purposes, including "Increased hiring, wages and pensions, R&D, environmental improvements, public-private partnerships, capital improvements and acquisitions," writes Fortune's Philip Elmer-DeWitt. In case you overlooked it, dividends weren't included in this list.

Pairing Apple's big spending on dividend and repurchases with an unlikely tax holiday that permits spending on dividends, a special dividend for Apple investors is unlikely. Without foreign cash, the company likely wouldn't have the funds for a special dividend to make sense. Short on domestic cash (in light of its aggressive spending on repurchases and dividends), Apple is already tapping into debt markets with low interest rates to help fund its capital return program -- a strategy that has worked out to shareholders benefit so far.

Even if a special dividend were possible, does it make sense?
With Apple trading as conservatively as it is, the company's current approach to capital return -- i.e., spending aggressively on share repurchases and paying out a moderate dividend while leveraging its payout with low-interest debt -- is the best policy for shareholders. A special dividend wouldn't be in the best interest of shareholders.

If Apple stock was overvalued, a special dividend could sound more enticing. But that's not the case. Consider: In Q1, Apple just obliterated all expectations. Earnings per share were up a whopping 48% from the year-ago quarter. iPhone sales were up an incredible 46% from the company's previous quarterly record set in the year-ago quarter. Clearly, Apple is firing on all cylinders. But in spite of its continued success, Apple trades at a forward price-to-earnings ratio of just 16.1. Comparatively, the average P/E across all the companies in the S&P 500 is 20.

Bring on the share repurchases and keep the dividend payouts moderate.