Accenture Trades Close to All Time High, Company Continues Buying Shares

| About: Accenture plc (ACN)

After the close on Thursday, Accenture (NYSE:ACN) reported earnings that surpassed earnings estimates. The company continues to report strong numbers with 21% revenue growth and 27% earnings growth.

More important to us is that all though the stock traded at an all time high during the quarter at $58.21, the company bought back $644M worth of stock at an average price of $56.50. The stock remains a top five pick in our Net Payout Yields (NPY) portfolio, which invests in stocks with high yields comprised of dividends plus stock repurchases.

Based on annualized Q3 numbers, the company has a dividend yield of 1.6% and a stock repurchase yield of 7.1% or a NPY of nearly 9%. Using trailing 12 month numbers, the yield is slightly lower.

Management is signaling that although share prices are at highs, the company still trades at a relative value compared to the growth opportunity over the next few years. This provides a great non-emotional method of selecting stocks for a conservative portfolio.

For now ACN stays in the portfolio, though going forward investors should keep a close eye on when management cuts back on stock buybacks. Conversely, if the stock keeps going up and management allows the dividend to sink even further without raising it, that might signal the company isn't comfortable with long term growth.

Per the ACN press release:

  • Revenues increased 21% in U.S. dollars and 15% in local currency
  • EPS up 27% to $0.93
  • New bookings are $7.1 billion
  • Company raises outlook for full-year growth to range of 14% to 15% in local currency and outlook for full-year EPS to range of $3.36 to $3.40

Share Repurchase Activity - During the third quarter of fiscal 2011, Accenture repurchased or redeemed 11.4 million shares for a total of $644 million, including 9.7 million shares repurchased in the open market. This brings Accenture’s total share repurchases and redemptions for the first three quarters of fiscal 2011 to 29.7 million shares, including 13.1 million shares repurchased in the open market, for a total of approximately $1.4 billion.

Accenture’s total remaining share repurchase authority at May 31, 2011, was approximately $1.7 billion.

Disclosure: I am long ACN.

Additional disclosure: The information contained herein is for informational purposes only and should not be relied upon as advice.