This post Trump’s $245 Billion Gift to Americans – Plus, 5 Must Knows For Monday, August 14 appeared first on Daily Reckoning.
You can cut the tension with a knife…
And no, I’m not talking about the taunts and threats flying between North Korea and the U.S. I’m talking about the frustration President Trump has expressed with Congress, thanks to the lack of progress on his key initiatives.
Take a look at the challenging tweet Trump sent to Senate Majority Leader Mitch McConnell at the end of last week.
As promised, Trump is certainly shaking things up in Washington. But that’s good news for those of you invested in Trump’s “cash for patriots” program.
Tax Reform Still Poses A “Huge” Opportunity
One of Trump’s most powerful initiatives is to reform the corporate tax code.
Today, U.S. corporations are paying higher taxes than most developed countries in the world. That puts U.S. companies at a disadvantage, and it hurts every single U.S. investor who owns stock in these companies.
Trump’s plan to lower taxes on U.S. corporations has the potential to generate higher profits, create more jobs, drive stock prices higher, and boost dividends paid to you. That’s why I’ve gone on record saying that I’m a big fan of corporate tax reform.
Now the corporate tax code is complicated and full of loopholes. It’s going to take a lot of work to implement an entirely new system. And you can bet there will be plenty of controversy when Congress attempts a reform package.
But there’s one part of the tax code that would be very easy to revise.
Revising this area would be attractive to both Republicans and Democrats.
This change would be great for the American people.
And adjusting this one area would represent a big step toward restoring American’s confidence in the political system.
I’m talking about the government’s tax on foreign earnings. And how reducing that tax would bring billions of dollars back to the U.S. — dollars that could fund dividends, and dollars that could fund new jobs.
During the campaign, Trump discussed lowering the corporate tax on profits that were earned abroad. Today, corporations are holding billions of dollars in overseas bank accounts to protect these profits from U.S. corporate taxes. If the companies were to bring the cash back into U.S. accounts, they would have to pay exorbitant taxes.
In addition to a lower tax on overseas profits, Trump also suggested a one-time tax holiday for companies bringing cash back to the U.S. This would give companies a “huge” incentive to bring billions of dollars back to the states all at once.
As the summer draws to an end and Trump turns up the pressure on Congress, I expect this corporate tax holiday to be one of the first issues that gets approved. It’s a measure both Republicans and Democrats can get behind. And it’s a great first step toward getting a more comprehensive tax reform started…
How To Profit From a Corporate Tax Holiday
Once Congress approves the special holiday for taxing overseas profits, corporations will quickly move billions of dollars back to U.S. accounts. Once that cash is held stateside, these corporations will be free to announce special dividends, new investments, and share buybacks.
Naturally, stock prices will jump higher. After all, shares will be much more attractive to investors because of larger dividends and inflated cash balances.
If you’re already invested in these stocks before a tax bill gets passed, you’ll be in great shape to profit from the event.
But if you wait until after the tax holiday is announced, chances are good that you’ll have to pay a much higher price to invest. That’s why I recommend buying dividend stocks that have a high overseas cash balance today. Before you miss out on this great opportunity.
The company with the largest overseas cash balance is Apple Corp. (AAPL).
Apple currently has a cash balance of $261.5 billion. And as Apple’s profits continue to accelerate, the company’s cash balance is only growing larger.
Since Apple does business around the globe, much of the company’s cash balance is held in overseas bank accounts. In fact, the Wall Street Journal estimates that 94% of Apple’s cash — or $245 billion — is parked outside of the U.S.
Apple can’t currently pay this cash to investors, because it would have to first move this cash back to the U.S. and pay high corporate taxes in the process.
But once Congress approves the overseas tax holiday, Apple will be sending billions back to the states. And that cash will be used the same way Apple is currently using its U.S. cash… To pay you!
Apple currently pays a 63-cent quarterly dividend, which gives investors a 1.6% yield. That’s a decent payout (especially considering the fact that Apple’s stock continues to trade higher), but it’s not nearly what it could be.
Once Apple “repatriates” its overseas cash, the company will be free to dramatically increase its dividend. (I call this the “cash for patriots” program – because it encourages U.S. companies to pay us bigger cash dividends)
Meanwhile, Apple continues to grow profits and trade higher — even before any tax reform has been passed. So investors are already profiting from this company’s tremendous success.
Readers of my Lifetime Income Report service have been collecting dividends from Apple since 2015. But there’s still time to make some great returns from this iconic American company. That’s why last week, I told my subscribers to buy Apple up to $175 per share.
The best is yet to come for this “cash for patriots” opportunity. So make sure you’re invested today before Congress adjusts the tax code, sending shares sharply higher.
Here’s to growing and protecting your wealth!
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