Apple’s new debt deal could mean more shareholder rewards after blowout earnings

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

The Cupertino, Calif. company expects to sell the bonds, which mature in seven, 10, 30 and 40 years on Thursday, with proceeds earmarked for general corporate purposes, including to repurchase stock and to pay of dividends, the company said in a public filing.

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

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

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

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

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

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

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

Netflix
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Google-parent Alphabet
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Twitter
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and other technology giants were also this week outlining policies for staff involving a more protracted return to offices or tighter masking requirements, in light of the delta variant that’s led to a rise in COVID-19 cases and hospitalizations.

Read: Silicon Valley is hardening line on returning to work — it’s fully vaccinated or bust

Apple, Microsoft
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Alphabet, Amazon.com
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and Facebook
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dominate the S&P 500 index
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with a combined 23% share of the index as of Friday.

The Dow Jones Industrial Average
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and S&P 500 both touched intraday all-time highs 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 reimplemented mask requirements at more than half of its U.S. retail stores for employees and customers, regardless of their vaccination status. It previously pushed back its plans to recall workers to its corporate offices by at least a month, but now also told employees that masks must be worn in its office buildings, even by the vaccinated.

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

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