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President Donald Trump's tax reform could give U.S. corporations access to trillions of dollars stashed overseas. Microsoft (NASDAQ:MSFT) could be the biggest winner in the shakeup.

Last quarter, the tech-giant reported it was sitting on $123 billion in cash. Of this total, more than 95% is abroad.

Shareholders have longed hoped the company would tap these holdings, sparking a wave of dividends and buybacks. The problem with this plan, however, has always been the tax bill the cash repatriation would trigger from the IRS. Instead, management has opted to keep the money overseas, earning meager returns in money market funds.

That might not be the case for long.

During the election race, Trump proposed a tax holiday on overseas cash holdings. He called for cutting the levy that corporations pay on repatriated cash from 35% to 10%. This policy, he argued, would spark a wave of investment and job creation in the United States.

"Donald J. Trump's tax plan will increase the economy and grow jobs by almost 2 million, while Hillary Clinton's tax plan will shrink the economy and lose 300,000 jobs." Trump's campaign team wrote in a press release describing its policy.

"In combination with the total economic reform agenda, the Trump economic plan will create at least 25 million jobs over the next 10 years."

Such a trigger event would be a major catalyst for Microsoft stock.

Right now, Microsoft is sitting on $117 billion of cash overseas. Investors, however, slap a big discount on this figure to account for the tax hit. Based on the current tax rates, the company's overseas holdings are only worth about $76 billion.

A holiday would completely change these numbers. Under the proposed rates, Microsoft could save over $29 billion. This would provide an immediate, one-time catalyst of up to six percent based on the stock's current market capitalization.

Some of this upside is likely already priced in. Investors have been anticipating a Trump tax holiday for some time, so a full six percent pop is unlikely. But as an announcement appears more likely, traders will apply a smaller and smaller discount to Microsoft's cash holdings.

Income investors would also benefit. If management were to repatriate all of its overseas cash holdings at once, they could pay out a 20% special dividend. This would likely be the largest corporate distribution in U.S. history.

More likely, executives would pay this money out in dribs and drabs. We would see a combination of dividend hikes, stock buybacks, and debt repayments. A big acquisition or two would also be on the table.

Microsoft wouldn't be the only winner in such a scenario, either.

Apple (NASDAQ:AAPL) holds $216 billion in cash overseas. Under the proposed tax rates, the iPhone maker would save over $50 billion in tax expenses. CEO Tim Cook hinted any reform would likely mean acquisitions in a recent conference call, though he doesn't want to give any specifics until a clear bill is tabled.

Qualcomm (NASDAQ:QCOM) is another cash-heavy tech giant. The company gushes cash flow and has over $28 billion stashed abroad. If management were to pay out its entire overseas holdings at once, it would trigger a 33% special dividend.

In the meantime, investors being ahead of a tax holiday face some risks.

No one can guarantee President Trump will follow through on his campaign promise. If a tax holiday is given the green light, any reform might not look exactly like what was outlined during the election race. Both scenarios could crimp the stock price.

In the meantime, any changes to Microsoft's core business could knock shares up or down. If no tax holiday is announced, dividend investors would be left holding the bag.

I'm not too worried, though.

Conservative leaders, however, seem to be sticking to their guns on tax reform. Last week, however, President Trump promised a "phenomental" tax announcement in the coming weeks. This could move the time table up on a tax holiday to 2017 or 2018.

If Trump makes good on his promise, analysts will start probing Microsoft's executives as to what they'll do with the windfall. Investors could likely expect Microsoft to announce its plans for a cash windfall soon after Trump's announcement, as early as the next quarter. The company could begin dishing out cash as early as late-2017 or 2018.

With or without a special dividend, Microsoft is still a wonderful stock to own. The company's Windows business remains a wide-moat near-monopoly. The company's move into enterprise cloud computing continues to pay off, as evident by a stellar 93% sales growth last quarter.

Investors are buying a true cash cow. Yes, a special dividend would be a major upside catalyst. In the meantime, shareholders are buying a dividend aristocrat in the making, which currently sports a total shareholder yield of 5%.

Bottomline, keep up on the rumors out of D.C. If Trump follows through on tax reform, it could trigger a dividend bonanza. Microsoft would be the biggest winner.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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.

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Donald Trump 'Trigger Event' Could Send Microsoft Soaring - Seeking Alpha