Apple: Pay Off The Debt

Nov. 20, 2017 9:20 AM ETApple Inc. (AAPL)89 Comments
Feria Investor profile picture
Feria Investor


  • The tax repatriation bill has made marked progress recently, passing the US House this week and on its way to the US Senate.
  • Apple's debt position has now crossed $100bn and serves as a ripe target for repatriated funds.
  • A dividend raise, special dividend, or large acquisitions also are waiting in the wings.

Apple’s (NASDAQ:AAPL) cash on hand, and the over 90% that it holds abroad for tax reasons, is a story as old as time: Apple has a huge cash hoard of approximately $265bn and there is no shortage of opinion on how it should spend its money. But a confluence of events may signify the time is now for Apple to embark a nuanced strategy: repatriate overseas funds, pay down corporate debt, issue a higher or special dividend, and end or slow its buyback.

The US House has passed its version of the corporate tax bill this week, portending a lower repatriation rate of somewhere between 7-15% that can be paid over a number of years.

Apple is not alone in its debt binge. In 2017, there has been over $1trn in corporate debt issuance from companies like Microsoft (MSFT), Visa (V) and Home Depot (HD), which have made significant contributions to the overall rise in debt issuance:

Source: FT

We have previously reported on Apple’s ominous appetite for issuing debt: it now has over $100bn in debt on its balance sheet, from nearly $0 at the end of 2011. Now, the Republican tax bill making its way through Congress will pave the way for Apple to repatriate some of its $250bn in cash held overseas while incurring a $30bn tax bill to be paid over a number of years should it bring back the whole pile. Here’s Apple CEO Tim Cook:

Let me now turn to our cash position. We ended the quarter with $268.9 billion in cash plus marketable securities, a sequential increase of $7.4 billion. $252.3 billion of this cash, 94% of the total, was outside the United States. We issued $7 billion in new Canadian and U.S. dollar denominated debt during the quarter, bringing us to $104 billion in term debt and $12 billion in commercial paper outstanding.

This article was written by

Feria Investor profile picture
I am a California native who has been investing for over a decade, ever since I was a teenager. Always a long-term outlook, believing in the strength of markets over multi-year time frames.

Disclosure: I am/we are long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for informational purposes only and should not be construed as investment advice. Consult your own investment advisor for a strategy that is right for you.

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