Apple shares gain on new bond sale plans; Jim Cramer sees ‘insane’ stock buyback

Apple shares gained Thursday after the world’s most-valuable company filed plans to raise billions in the bond market that could be used to boost shareholder returns, including dividends and buybacks.

Apple logoMartin Baccardax for TheStreet:

In papers filed with the Securities and Exchange Commission Thursday, Apple said it may sell four different notes, ranging in maturities from seven to forty years, with proceeds directed to “general corporate purposes, including repurchases of our common stock and payment of dividends under our program to return capital to shareholders, funding for working capital, capital expenditures, acquisitions and repayment of debt.”

TheStreet‘s founder, Jim Cramer, said a successful long-bond offering, priced at a yield premium to U.S. 30-year Treasury bonds, would allow Apple to “buy back an insane amount of stock.”

Apple raised $8.5 billion in a four-part bond sale last year that included maturities of 2030 and 2050, with coupons ranging from 0.75% for their three-year paper and just 1.75% for their benchmark 10-year notes. Since then, it has tapped the market three more times — not including today’s plans — including a $14 billion sale in February.

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    1. Not cheaper, just too cheap to pass up. Allows you to keep the cash. Elon Musk lives his entire life this way. His whole net worth is in stocks, and he lives on pretty much 100% borrowed money. His potential gains in his shares are worth incredibly much more than whatever trickle of interest he’ll have to pay.

    2. If I remember my Econ 101 correctly, if probably has to do with opportunity cost. The interest rates they are paying on the bonds are quite low, and they probably believe the returns they can generate through use of their cash (e.g. acquisitions, R&D) are greater. As an example, I think their investment in chip development has paid off tremendously.

  1. Isn’t Apple just piling up more unnecessary debt? When do they intend to pay it back? I think it’s a shame they’re leaning far more on buybacks than dividends. I’m sure Apple knows the best way to distribute money to shareholders, so I shouldn’t complain. The thing is, Apple keeps pouring money into buybacks but the stock doesn’t seem to fare any better than companies that aren’t constantly buying back shares. Of course, it’s quite possible I don’t know exactly what to look for and maybe the share buybacks are the best way to distribute cash to shareholders.

    1. “…the stock doesn’t seem to fare any better than companies that aren’t constantly buying back shares.”

      In the last ten years, assuming reinvested dividends, it is up 1200%. That is 29.2% annualized.

      It is possible that their management has some idea of what they are doing.

  2. The Fed has whacked what (good/hard) money should be: scarce. When it’s not scarce these kind of actions are seen–IF one has assets already.

    I have nothing against the wealthy, or people/entities with $$, but the Fed’s actions also serve to increase the chasm between the haves and have nots. It’s not the have nots that are borrowing $$ that ultimately increases/creates wealth.

  3. This is AAPL, not Amazon.
    AAPL needs to be careful re: dividends/lack thereof. It’s atrocious that the yield is now less than 1% and many people in retirement or approaching it may sell AAPL stock to get another vehicles with decent yield. There’s MILLLIONS of us out there like this.

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