Yesterday, the S&P Dow Jones Indices reported that "S&P 500 stock buybacks decreased 4.4% to $99.1 billion during the fourth quarter, off slightly from the $103.7 billion spent on share repurchases during the third quarter of 2012."
While some investors like dividends, I personally prefer buybacks because the government doesn't tax me on them and because they increase my stake in the business.
From this report, Exxon Mobil (NYSE:XOM) was the company with the largest buyback. From the top 20 companies with the largest buybacks, Chevron (NYSE:CVX) was the only other company from the Energy Sector. Below is a fundamental analysis of the two.
Coming in first required Exxon to repurchase $5.254 billion in shares during Q4 2012. This was $876 million more than AT&T (NYSE:T) who had the second largest buyback of the companies in the S&P 500. XOM shares are up 5.33% YTD and currently trade for $90.58 per share, near their 52 week high. Analysts have a mean target price of $94.42 per share and median target price of $96.00 per share.
Positives for Exxon
- Average revenue growth over the last 3 years of 15.8% is well above the industry averages 1.6%.
- Also above the industry average is Exxon's operating margin of 16.3%, net margin of 9.3% and ROE of 28.0 (industry's averages are 14.4%, 8.1%, and 19.2 respectfully).
- In addition to the buybacks, XOM has a dividend yield of 2.53%.
- From the $482.429 billion in revenues XOM produced in 2012, net cash from operating activities came in at $56.170 billion (11%).
In the 4th quarter of 2012 Chevron bought back $1.18 billion in shares making it the only other company in the energy sector to place in the top 20 of the biggest S&P 500 buybacks (CVX was 19 out of the top 20). Shares of CVX currently trade for $120.19 per share, up 12% YTD and at their 52 week high. Analysts have a mean target price of $126.35 and median target price of $127.00 on the shares, indicating a more bullish outlook in comparison to shares of Exxon that already trade at their price target.
Positives for Chevron
- Average revenue growth over the last 3 years of 12.1% is above the industry averages 1.6%.
- Operating margin of 19.2%, net margin of 10.8% and ROE of 20.3 are all above the industry averages 14.4%, 8.1% and 19.2 respectfully.
- On revenues of $241.9 billion, Chevron had cash from operations of $38.8 billion (16%).
- In addition to the buybacks, Chevron currently carries a dividend yield of 2.98%.
Investors have to like the massive amounts of money these two energy giants are producing and especially more because they are returning a large amount directly to investors. In addition to purchasing shares directly, a more diversified investment can be made by purchasing the following ETFs that have both Exxon and Chevron as two of their top 10 largest individual holdings: