Apple Taps Bond Market for the Third Time Amidst Aggressive Share Buybacks and Dividends

February 03, 2021 01:08 PM AEDT | By Team Kalkine Media

Apple Taps Bond Market for the Third Time Amidst Aggressive Share Buybacks and Dividends

Apple Taps the Debt Market for Refinancing at Lower Borrowing Cost

The bond selling by the giant would mark the third such issue in less than a year, following the first issue of USD 8 billion in May 2020, and the second issue of USD 5.5 billion in August 2020.

The Company intends to issue the debt in six parts, with the longest maturity going to 40-year with a coupon of 95 basis points above Treasuries, as reported by Bloomberg.

Over the last three years (until 2020 from 2017), Apple has not borrowed much from the U.S. investment-grade debt market. However, the plunging interest rates across the nation has attracted the world’s most valuable company to fund its aggressive share buybacks and dividends through debt financing.

According to Bloomberg Barclays Index data, an average investment-grade company should be able to borrow at a rate of ~ 1.86% for about nine years, making the issue relatively cheaper for the behemoth, and down against its last offered debt rate of 1.94%.

Many prominent investment banks, including Goldman Sachs, JPMorgan Chase, and Morgan Stanley are taking charge while managing the bond's sale.

At present, the Company plans to use the proceeds from the issue for general corporate purposes, including share buybacks, working capital, capital expenditure, repayment of debt, and so on.

Value Purse Open for Shareholders as Apple Aims for Net Neutral Cash Position

The Company has a strong cash position, and the likely come back to the bond market might indicate a large potential to grow the shareholder’s value ahead. For example, the Company has hoarded cash for years but is now known to have switched strategies by reducing its net cash position, and it is mainly doing so by opening its purse for shareholders.

Image Source: © Kalkine Group 2020

The Company generated a record operating cash flow of USD 38.8 billion during the first quarter of the financial year 2021, returning USD 30 billion to shareholders, in line with its target of reaching a net cash neutral position over time.

Additionally, Apple reported a 21 % jump in revenue for Q1 FY2021 and a 35 % jump in earnings per share, taking the same to a record high.

The revenue for the period reached USD 111.4 billion, leading to an EPS of USD 1.68. The major push in the revenue for the period was provided by international sales, which represented 64 % of the periodic revenue.

Apple declared a dividend of USD 0.205 a share on the common stock, payable on February 11, 2021, to shareholders of record as of the close of business on February 8, 2021.

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