“The maker of iPads, iPhones and Macbooks made headlines Tuesday saying it planned to sell $15 billion to $17 billion worth of bonds as part of its strategy to return profits to shareholders,” Ian Salisbury and Jonnelle Marte report for MarketWatch. “Apple’s devoted customers have shown a willingness to buy almost anything that company offers. But with yields on high-quality corporate bonds so meager, many financial advisers think investors should be wary of adding more of these to their portfolios.”
“To be sure, Apple’s bonds have some attractive features. They will be rated Aa1 by Moody’s and AA+ by Standard & Poor’s—just a notch below these agencies’ top ratings,” Salisbury and Marte report. “One key reason: Despite operating in the fickle personal computer business, Apple’s $140 billion cash hoard makes even $17 billion look easy to repay.”
Salisbury and Marte report, “While the Federal Reserve has been holding rates down to spur economic growth, that won’t last forever. When rates climb, bond prices fall, meaning investors in Apple bonds could lose money even if the company’s next big product is as big a hit as the iPhone or iPad. Indeed, investors have pulled more than $1 billion from the iShares investment-grade bond ETF so far this year. With Apple’s stock at roughly $444, a third below its high of more than $700 last fall, many say the company’s stock has more upside for investors.”
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