Special Dividends: Alphabet Edition – Alphabet Inc. (NASDAQ:GOOG)

In our continuing series on the prospect of a Trump Tax Repatriation proposal, today we are diving into Alphabet (GOOG) (NASDAQ:GOOGL), its cash offshore, and updating the outlook on the tax proposal to be released this week. In sum, Alphabet is in great position to take advantage of a tax repatriation holiday and shareholders stand to gain from such a move.

Prospect of the Tax Plan

This week, House Ways and Means Chairman Kevin Brady (R), will be unveiling details to the House Republican’s plan for tax reform. The measure’s reach is still anyone’s guess. Corporate tax issues include tax breaks for closing US plants, deductions for building plants in other countries, simplifying tax rates and closing loopholes like the carried-interest break, and even changes to the estate tax.

At the forefront for the investing community is the tax repatriation holiday, last deployed in 2004. While the promised increases in hiring and higher capital expenditures didn’t materialize, it also hasn’t stopped multinational companies to leaving foreign cash overseas.

A Subcommittee report that surveyed 20 major multinational companies (including the top 15 in most repatriated funds) found:

the repatriation tax break created a competitive disadvantage for domestic businesses that chose not to engage in offshore operations or investments, and provided a windfall for multinationals in a few industries without benefiting the U.S. economy as a whole.”

Alphabet may be one of the multinationals set to benefit should a repeat of 2004 occur today.

Alphabet Cash Off-shore

Alphabet, a advertising and content conglomerate most recently reported that over 60%, or nearly $60bn, of their $95bn in cash and marketable securities is held overseas. As a point of reference, Microsoft (MSFT) issued $32bn, $3/share special dividend pursuant to the 2004 holiday, which totaled over 60% of its total cash/short-term investments. Should Alphabet decide to embark on a special dividend, they would…

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