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 (XOM) was the company with the largest buyback. From the top 20 companies with the largest buybacks, Chevron (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 (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: