This week I will run you through the most important buyback announcements for the week of 11 March till 16 March.
While consumers and governments across the world are strapped for cash, corporations have plenty. Rather than signal long-term trust and pay more generous long-term oriented dividends, many of them have adopted share repurchases to buy back their own stock. Investors welcome these announcements as they boost earnings per share and provide a lot of support for the share price during the repurchase periods.
State Street (STT) announced a new $1.8 billion repurchase program, sufficient to retire 8.1% of outstanding shares. The financial holding company made the announcement after getting the Federal Reserve's blessing. The buyback comes on top of the 2.1% dividend yield that investors receive per year.
Health Net (HNT) announced an addition of $324 million to its existing repurchase program. The health care benefit provider will be able to repurchase another 10% of shares outstanding. Over the last four years the company has already repurchased some 17% of its outstanding shares. The renewed buyback is welcomed by investors who receive no dividends.
KeyCorp (KEY), the bank holding company announced a $344 million repurchase program after the Federal Reserve allowed the buyback. The bank is able to repurchase roughly 4.2% of outstanding shares at the current price level. On top of the repurchase, shareholders receive a 1.4% dividend yield per year.
PMC-Sierra (PMCS) announced a $275 million repurchase program. The internet infrastructure semiconductor provider announced the plan which would retire 17% of outstanding shares at the current price level of $7 per share. The internet company does not pay any dividends, however the timing of the buyback seems favorable as the shares have hardly participated in the broad-based equity rally over the last months.
Discover Financial Services (DFS) announced a new $2 billion repurchase program, enough to retire some 11.7% of its outstanding shares. The banking and payment provider announced the program after shares hit multi-year highs around $30 a share. Besides the relative large buyback, shareholders also receive a 1.2% dividend yield.
During the last week, these five companies described above announced repurchase plans totaling $5 billion, which is roughly seven times their combined annual dividend payment, which comes in at around $800 million.
Cash rich companies still refuse to significantly raise long-term dividends. Rather, they use one-time repurchase agreements with far less signaling power as a dispersion tool of excess cash to their shareholders.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.