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What are we looking for?

U.S. companies poised to plow billions in repatriated cash into dividends.

The screen

Congress's big tax cut should see U.S. multinationals bring home $2-trillion (U.S.) held overseas. The overhaul cuts the corporate tax rate to 21 per cent from 35 per cent, but it also clears U.S. companies to repatriate cash from their foreign operations at a rate of 15.5 per cent, also down from 35 per cent.

A similar tax break in the Homeland Investment Act of 2004 funnelled an estimated 79 per cent of that money into buybacks and 15 per cent into dividend increases.

But which U.S. corporations are poised to do the same this year? Our search started with an extensive list of U.S. stocks. We then pinpointed those with strong sales and profit, sustainable dividends and enough offshore cash to move the needle on their dividend payouts and buybacks.

We then applied our TSI Dividend Sustainability Rating System. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign-currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest newsletter. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated nine stocks. Between them, tech giants Apple, Microsoft, Cisco and Oracle have $512-billion socked away overseas. They've already loaded up on research and acquisitions, so that primes them to boost dividends and share repurchases. Pharmaceuticals Amgen and Gilead have rock-solid cash flow and balance sheets; they're free to deploy cash as they wish. Consumer giants Procter & Gamble, Coca-Cola and PepsiCo have big international revenues and are under strong pressure to reward shareholders.

We advise investors to do additional research on investments we identify here.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

U.S. multinationals primed to boost dividends and share repurchases

Ranking*CompanyTickerMarket Cap ($Bil U.S.)Recent Share Price ($U.S.)1-Yr Total Return % Foreign cash holding ($Bil U.S.)Foreign cash per share ($U.S.)Dividend Yield (%)PointsDividend Sustainability Rating
1Procter & GamblePG-N231.090.478.415.05.913.110Highest
2Microsoft Corp.MSFT-Q680.687.8240.2132.117.121.910Highest
3Apple Inc.AAPL-Q886.8174.2946.3252.349.601.410Highest
4Coca-Cola Co.KO-N197.046.0712.324.95.843.29Above Average
5Cisco SystemsCSCO-Q196.239.9131.469.113.982.99Above Average
6Amgen Inc.AMGN-Q133.1182.8615.238.953.582.99Above Average
7PepsiCo Inc.PEP-Q167.9117.4815.217.512.312.79Above Average
8Oracle Corp.ORCL-N203.148.8026.258.514.131.69Above Average
9Gilead SciencesGILD-Q102.078.714.932.424.802.68Above Average

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements.