President Donald Trump and Congressional Republicans have plans to change the tax code to give businesses greater incentive to invest in the U.S. and to hire more Americans. That could mean a nice payday for shareholders of tech titan Apple Inc., which has $216 billion parked overseas.
One proposal would allow companies to return profits from overseas operations to the U.S. without facing double taxation – although many companies that repatriated cash during a 2004 tax holiday cut jobs and spending on research and development.
Still, investors are salivating over repatriation, which could boost the earnings per share of the S&P 500 stock index by at least 3 percent, according to estimates by Bank of America Merrill Lynch.
“If repatriation is accompanied by an end to interest expense deductions, companies may choose to pay down debt over buybacks,” Savita Subramanian, head equity strategist at BofA, said in a Jan. 29 report obtained by Newsmax Finance. "Companies may also return the cash to shareholders by issuing a one-time special dividend: income remains in demand, given that both interest rates and dividend payout ratios remain historically low."
While higher dividends and stock buybacks are popular, 60 percent of fund managers surveyed by BofA would like U.S. companies to make investments in plant and equipment rather than return cash to shareholders.
Bank of America compiled a list of companies most likely to benefit from repatriation:
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