This week, I will run you through the most important buyback announcements for the week of June 11th till June 15th which turned out to be a very active week in terms of buyback activity.
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.
Benchmark Electronics (BHE) the provider of integrated electronic manufacturing services announced a $100 million share repurchase program, sufficient to retire 12.2% of its shares outstanding. The plan comes in addition to its 2010 repurchase plan which was of a similar size. Over the last four years the company has already retired over 10% of its shares outstanding. Investors are happy with the announcement sending shares up 3.5% on Friday. So far this year shares have returned 5.5% since the first of January.
International Game Technology (IGT) the global gaming company announced a $1 billion share repurchase program. The slot machine maker plans to buy back its shares in the coming three to four years. The plan which allows the company to retire 22.7% of its shares outstanding shows the confidence of the company in the underlying business trends. Shares in International Game Technology rose 7.5% over the past week, narrowing year to date losses to 13%. Analysts at Stifel Nicolaus are enthusiastic about the announcement noting that "buybacks make sense at current levels, offering compelling value." The announcement of the plan comes on top of a quarterly dividend of $0.06, for an annual dividend yield of 1.6%
Kroger (KR) the operator of grocery stores announced a $1 billion share repurchase program sufficient to retire 8.0% of its outstanding shares. Shares jumped more than 6% on the back of the announcement of the buyback program and a raise in its full year earnings outlook. The company has already retired about 10% of its shares in the last four years. So far this year shares in Kroger have lost 6%. Over a longer five year period shares are down 25% as the company operates in a brutal business with "razor-thin" margins. The company pays a quarterly dividend of $0.12 for an annual dividend yield of 2.0%
Smithfield Foods (SFD) the producer of fresh meat and packaged meat products announced a $250 million share repurchase program sufficient to retire 8.1% of its shares outstanding. The new program, which will replace the current repurchase program which is almost exhausted, will be executed over the next two years. The timing of the new program comes after shares have fallen 20% year to date reaching their lowest levels since October 2011. Currently the company does not pay a dividend.
Aruba Networks (ARUN) the provider of solutions which helps employees connect remotely to corporate information technology networks, announced a $100 million share repurchase program, sufficient to retire 6.2% of its shares outstanding. Over the last four years the company has seen an almost 50% increase in its shares outstanding as the company issued shares to finance its growth plans and used them to compensate its employees. After a 40% correction in the recent year, Aruba takes advantage of the lower share price and announced the program. Currently the company does not pay a dividend.
Juniper Networks (JNPR) the developer of products and services for network infrastructure solutions announced a $1 billion share repurchase program, which is sufficient to retire 11.5% of its shares outstanding. The manufacturer of routers and switches aims to reduce dilution of the issuance of shares under its employee stock programs. Shares have fallen 45% over the last year as telecommunication customers have reduced their capital expenditures in a response to the slowdown in the wider economy and shift in consumer demands. Currently the company does not pay a dividend.
Philip Morris (PM) the manufacturer and distributor of cigarettes and other tobacco companies announced a massive $18 billion share
repurchase program. The plan which is expected to be executed over the next three years is sufficient to retire about 12% of the company's shares outstanding and will replace its current $12 billion program launched in 2010. Over the last four years the company has already retired some 15% of its shares outstanding, which combined with excellent operational performance resulted in a 79% increase in the company's share price over that time frame. Currently the company pays a quarterly dividend of $0.77 for an annual dividend yield of 3.5%
Celgene (CELG) the biotechnology company focused on development and commercialization of cancer treatments announced a new $2.5 billion share repurchase program. The announcement of the program which enables Celgene to retire 8.6% of its shares outstanding comes after shares have seen a correction of 20% in recent weeks. Earlier this year the company acquired Avila Therapeutics for $350 million in cash and $575 million in contingent milestone payments. Currently the company does not pay a dividend.
C.R. Bard (BCR) the manufacturer and distributor of medical, surgical and diagnostic products announced a $500 million share repurchase program. The plan which is sufficient to retire 5.8% of its current shares outstanding comes on top the $88 million which is still remaining under its 2010 authorization. Furthermore the company raised its quarterly dividend to $0.20, for an annual dividend yield of 0.8%. Over the last four years the company retired about 15% of its shares outstanding. So far this year shares have returned 20%.
During the last week, repurchase activity picked up significantly as total announced deal size came in close to $24 billion, making it a rather active weeks in terms of buyback activity. The high level of activity was largely explained by Philip Morris' massive $18 billion repurchase program.
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.