Over the past few years, the richest company in the world has continued borrowing increasing amounts of money from all over the world. Apple's (NASDAQ:AAPL) debt position has ballooned considerably ever since it launched its capital return program in 2012. Including commercial paper and long-term debt (current and noncurrent), Apple had an incredible $54 billion in debt at the end of the second quarter, a figure that's been steadily rising over the years.

Aapl Debt

Source: SEC filings. Calendar quarters shown.

What's more, after the quarter closed Apple detailed plans to raise even more debt capital. The Mac maker sold $2 billion in its first sterling-denominated bond offering in July, then proceeded to sell another $2 billion in so-called "Kangaroo" bonds in Australia as it continues to diversify its credit investor base.

There are many benefits of this debt strategy that have been regularly noted by investors. Apple gets to avoid repatriation taxes since it doesn't need to tap foreign reserves, which now consist of nearly 90% of total cash. It gets to fund its share repurchase program, driving significant earnings accretion. Heck, Apple even gets to lower its weighted average cost of capital, or WACC, by essentially swapping out equity capital for debt capital.

But at what cost?
Even with the low-interest environment that we're currently in, all that debt adds up and can cost a pretty penny. Yet here's another reason why investors should love the company's debt strategy: all that debt comes at no net cost.

Apple's investment portfolio has grown considerably over the years, as its cash position has soared. The company's cash investment arm, Braeburn Capital, which is often incorrectly characterized as a "hedge fund" by the broader media, manages Apple's cash very conservatively. Tim Cook has said that Braeburn invests in "the most conservative investments known to man" with "the goal of capital preservation."

On Apple's income statement, you'll notice the line item "Other income and expense." It's here that Apple reports things like interest and dividend income, interest expense, and the results from its various hedging operations. Starting last year, Apple began breaking down this line item to provide investors with more detail, and the great thing here is that interest and dividend income from Apple's sizable investment portfolio more than offset its interest expense by a healthy margin. This is how Apple delivers all of the benefits of its debt-funded capital return program at no net cost.

Aapl Oie

Source: SEC filings. Calendar quarters shown.

For example, last quarter's interest and dividend income of $766 million more than covered the $201 million interest expense.

However, this arrangement can't last forever. As Apple's debt burden grows, so does its interest expense, and total debt has been growing much faster than the long-term investment portfolio. It's quite likely, if not inevitable, that eventually interest expense will exceed interest and dividend income, and Apple will have to start paying out of pocket. But even when that day comes, it will still be far cheaper than repatriation taxes (unless there is a tax holiday).

Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.