What you need to know
- Apple is issuing its cheapest bonds in years.
- That's because it's taking advantage of Federal Reserve emergency measures.
- Several companies have already taken advantage of the measures.
Apple is issuing the cheapest bonds it has in years thanks to emergency measures enacted by the Federal Reserve.
As Reuters reports:
Apple Inc (AAPL.O) on Monday capitalized on the Federal Reserve's emergency measures in response to the coronavirus outbreak to issue its cheapest bonds in years, making it the latest blue-chip company to do so to fund stock buybacks and dividends. Apple's offering illustrates how companies with the best credit ratings are boosting shareholder returns by tapping cheap debt made available through the Fed's backstopping of the credit markets. Apple shares are virtually flat year-to-date, compared with a 12% drop in the S&P 500 Index
Apple raised $8.5 billion by selling four different bonds, ranging from three year's maturity to 30. As Reuters notes, its three and five-year bonds had "the lowest rates the company has paid on bonds with such durations since 2013."
The money will be used for "general corporate purpose" such as share repurchasing and dividend payments. According to the report, Federal Reserve interest rates were "slashed" in March to help struggling companies during the global pandemic, and the move has fuelled record uptake from companies including Boeing and Ford.
Larger companies such as Apple have also been able to take advantage:
The policy has also allowed financially strong companies such as Apple, which had just over $40 billion in cash as of the end of March, to reduce its cost of capital to the benefit of shareholders.
Last week, Apple reported Q2 earnings of $58.3 billion and recorded 1% growth over the previous year.