Apple’s New Debt Deal Could Mean More Shareholder Rewards After Revenue Burst

Apple Inc. hit the market on Thursday with a four-part bond deal, with a view to preserving its mega-program to return capital to shareholders after the iPhone maker reported blockbuster earnings earlier this week.

The Cupertino, California-based company expects to sell the bonds, which mature in seven, 10, 30 and 40 years, on Thursday, with the proceeds going to be used for general corporate purposes, including stock buybacks and paying dividends. company said in a public inquiry.

Apple’s shortest class of seven-year bonds had an initial target spread of about 60 basis points versus Treasurys BX:TMUBMUSD10Y, while the longest 40-year category was closer to 115 basis points above the risk-free benchmark, according to a person with direct knowledge of the trades. Bond spreads are the level that investors are paid over a risk-free benchmark to offset credit risk. Apple did not immediately respond to a request for comment.

“We expect Apple AAPL,
to use the proceeds for shareholder returns and to a lesser extent debt service,” Jordan Chalfin, senior technology analyst at CreditSights, wrote in a note dated Thursday.

“The company has $72 billion in net cash in the most recent quarter and has a long-standing goal of becoming net cash neutral over time.”

Chief Executive Tim Cook said on Tuesday that Apple has already returned $29 billion to shareholders in the June quarter, during the company’s earnings call. Shareholder awards were split between $3.8 billion in dividend payments and $17.5 billion in share repurchases.

During the conversation, the company also said its board of directors approved a cash dividend of $0.22 per share on Aug. 12.

Thursday’s new debt financing comes after Apple posted third-quarter net income of $21.74 billion, nearly double from a year ago, and huge surprise revenue of $5 billion for its iPhone business.

But like other tech giants reporting results this week, it also forecast a slowdown in growth through the remainder of 2021.

Google parent alphabet GOOGL,
Twitter TWTR,
and other tech giants also outlined policies this week for staff with more extended returns to offices or stricter masking requirements, in light of the delta variant that has led to an increase in COVID-19 cases and hospitalizations.

Read: Silicon Valley hardens line on return to work – it’s fully vaccinated or busted

Apple, Microsoft MSFT,
Alphabet, AMZN,
and Facebook FB,
dominate the S&P 500 index SPX,
with a combined share of 23% in the index as of Friday.

The Dow Jones Industrial Average DJIA,
and S&P 500 both hit their all-time highs on Thursday as the stock market focused on mostly robust quarterly results and put COVID and growth concerns on the back burner.

For its part, Apple has reintroduced mask requirements in more than half of its US stores for employees and customers, regardless of their vaccination status. It previously pushed back its plans to recall workers to its headquarters by at least a month, but has now also told employees that masks must be worn in its office buildings, even by vaccinated people.

The Centers for Disease Control and Prevention also reversed May’s more liberal masking guidelines this week, now recommending that even fully vaccinated people wear masks in areas with “significant and high transmission” of COVID-19, as well as in K-12 schools. .