It’s a huge number that happens to be the amount of cash that could soon be paid out to investors.
It’s not a typo. We’re talking about more than two trillion dollars. To help put it in context, that’s more than the annual gross domestic product of India, Italy or Brazil.
Right now, large American companies are legally holding huge sums of cash in offshore tax havens, including Bermuda, Ireland, Luxembourg and the Netherlands.
A study in late 2015 found that 72% of companies in the Fortune 500 were holding cash offshore.
And the total amount was $2.1 trillion. Now, you probably know many of the biggest players.
- Apple: $181 billion
- General Electric: $119 billion
- Microsoft: $108 billion
- Pfizer: $74 billion
Why do these companies keep so much cash overseas?
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Thanks to the use of tax havens, they pay 6% taxes on their international profits. That’s a tiny fraction of the 35% tax for profits earned here in the U.S.
That creates a huge incentive for these companies to reduce their taxes by more than 80%. And there are countless lawyers and accountants who earn millions by advising these companies how to use international tax laws to their advantage.
Most folks think these aggressive tax avoidance practices are unpatriotic. Others think these large companies are simply obeying the poorly designed laws. Regardless of your personal views, there is an important situation setting up right now.
On Nov. 8, the American people will select their 58th President. Right now it appears that the election will feature Democrat Hillary Clinton against Republican Donald Trump.
In recent issues of Dividend Alerts, we’ve highlighted the tax policies of both Hillary Clinton and Donald Trump.
Our research shows that there is one – and only one – thing that these two candidates agree upon.
They both want to force American companies to bring their overseas cash back to the U.S. They would likely accomplish this by offering a limited-time tax holiday, thereby allowing companies to pay a lower tax than the typical 35% corporate rate. This “repatriating” of corporate profits could provide a huge tax windfall for the U.S government.
The politicians hope that these corporations will invest in America by building new facilities and hiring more employees. But that’s unlikely to happen…
Instead, American corporations will continue to follow their typical playbook by issuing dividends and buying back their own stock.
Yet with stock prices near record highs, our analysis shows that huge dividends will be the preferred solution.
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These huge one-day payouts happen all the time. And they’re likely to become far more frequent in late 2016 and early 2017.
Consider some of America’s cash-rich companies. If they elected to pay out all of their cash, here’s how much investors could collect.
- Apple: 36%
- General Electric: 43%
- Microsoft: 26%
- Pfizer: 36%
It’s important to note that we’d never expect these companies to pay out all of their cash. But even if they paid out 50% of their cash in a dividend, shareholders could collect huge payouts.
And it’s not just Fortune 500 companies that are making huge payouts. Every year, dozens of small and mid-sized companies issue these special payments for similar reasons.
The Bottom Line: Huge Dividends Coming Soon
There will be a new president in the White House in January 2017. The president is likely to take swift action to encourage or force American corporations to bring their offshore cash back into the U.S.
When that happens, many of these companies will elect to issue huge dividends to their shareholders.
Our research shows that these payouts could yield 10%-60% in a single day.
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