What Made Apple (AAPL) Raise $6.5B In Bonds?

After reporting blockbuster quarterly earnings last week, Apple Inc. (AAPL - Analyst Report) raised about $6.5 billion by selling bonds on Monday. As per media reports, initially, the company had plans to sell bonds worth $5 billion. However, strong demand from investors led to a 30% increase.

The company had issued the securities in as many as five parts with the maturity period ranging from 5 years to 30 years. The 5-year $1.25 billion worth of bonds came with a yield of 1.55% while the $2 billion worth 30-year bonds had a yield of 3.4%. According to reports from Bloomberg, the yields were higher than the comparable Treasuries.

This is the fourth debt offering by the company, which has raised about $32.5 billion since Apr 2013. The company has been returning the realized cash to its shareholders in the form of dividends and share buybacks and repayment of debt.

Why the Move?

This move is surprising for a company that has reported over 47% growth in year over year earnings on a 30% rise in revenues. Additionally, this high valued stock has nearly $178 billion in cash and marketable securities.

However, a major portion of this cash was held with the company’s foreign subsidiaries. Hence in order to avoid a corporate income tax of approximately 35% by repatriating foreign income back to the U.S., the company deemed it fit to raise debt domestically.

In fact, this move comes at an opportune time for the company given the favorable credit ratings (Aa1 by Moody) and lower borrowing costs.

Our View

Initiatives like this are encouraging as it reaffirms Apple’s commitment to share profits with its investors. This bond sale reflects the company’s confidence in its growth prospects. Strong investor demand for the bond is a positive.

Apple shares have gained about 8.7% since Jan. 27 when the company declared strong first-quarter 2015 results backed by solid iPhone and Mac sales. We believe that the uptrend is likely to continue for this Zacks Rank #2 (Buy) stock.

Other Stocks to Consider

Some other technology stocks worth considering at this moment include DST Systems Inc. (DST - Analyst Report), Imperva Inc. (IMPV - Snapshot Report) and MicroStrategy Inc. (MSTR - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).