I read that Apple has $256.8 billion in cash. Wouldn't it be better to use that money to expand its business or pay shareholders a dividend?
Ideally, Apple (NASDAQ:AAPL) would use its cash hoard to make acquisitions that add value to the company. As my Foolish colleague Adam Levy recently pointed out, Apple could easily buy a major media outlet such as Time Warner or Viacom, a content-distribution platform like Netflix, and a music-streaming company like SiriusXM or Pandora, and still have cash left over to give its shareholders a big one-time dividend payment. I'm not saying that any of these would necessarily be in the best interests of Apple investors, but the point is that the company could do it.
The problem is where Apple's cash is. The vast majority of Apple's cash stockpile -- 94% at the end of 2016 -- is held overseas. If it were to bring the cash back to the U.S. to put to work, it would need to pay hefty repatriation taxes on the money. The corporate tax rate is currently 35%, so we're talking about over $80 billion in taxes just to bring the company's money home.
President Donald Trump, as well as Republican leaders in Congress, have expressed support for a repatriation tax holiday with a one-time rate of 10%. A similar tax holiday was enacted in 2004, and could potentially save Apple about $60 billion.
The bottom line is that if a repatriation holiday takes place, it's a safe bet that Apple won't be sitting on a quarter-trillion-dollar mountain of cash for much longer. Until then, however, Apple feels that repatriation of its foreign profits simply isn't in the company's best interest.
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