Seeking Alpha

Dow soars 7% amid beat, boost to capital returns

  • It's eye on Dan Loeb, Dow Chemical (DOW) boosts its quarterly dividend by 15% to $0.37 per share, and triples the size of its 2014 buyback authorization to $4.5B.
  • Management outlook comments also seem focused on Loeb: "[The results are] clear evidence of our ability to manage all aspects of our integrated business to generate strong financial performance in an uncertain world ... Our actions to improve return on capital, grow profitability and generate cash are accelerating as we go deeper into attractive end-use markets, exit complex but non-strategic assets and value chains, and maintain a strong focus on productivity metrics and cost controls."
  • CC at 9 ET
  • Press release, Q4 results
  • DOW +7% premarket

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Comments (7)
  • quabbin
    , contributor
    Comments (127) | Send Message
     
    Are share buybacks a sign of an improving economy?
    Many companies seem to be doing this.
    29 Jan 2014, 08:16 AM Reply Like
  • Minutemen
    , contributor
    Comments (1579) | Send Message
     
    Share buybacks are not a sign of an improving economy. They are a means of manipulating EPS by removing the shares from the market (reducing the float). This has been common lately because the economy has been struggling (if consumers aren't buying, earnings and thus EPS go down; however, if companies buy back shares, there are fewer shares available in the market, which increases EPS and allows companies to "beat" analysts predictions). Companies would not need to buy back shares to boost EPS if the economy was doing well.

     

    Are share buybacks a good thing? Depends. They can add value to the stock if the company buys back shares on the cheap. If however they buy back shares at high valuations, then it is not a good value to shareholders (increasing the dividend more would be a better strategy). Also, many companies buy back shares then turn around and give them to employees and CEOs as compensation, which puts them right back into the market again.

     

    Well managed companies will buy back shares when the valuations are reduced. There is no clear cut answer to whether share buy backs are a good thing or not.
    29 Jan 2014, 09:09 AM Reply Like
  • chopchop0
    , contributor
    Comments (3950) | Send Message
     
    "Well managed companies will buy back shares when the valuations are reduced. There is no clear cut answer to whether share buy backs are a good thing or not."

     

    I've rarely seen situations where share buybacks were timed well. One of the best examples though has to be when Warren Buffett started intermittent buybacks of BRK stock when the book value got to 1.1 or less. I bought some BRK.B around $65 in the fall of 2011 around the same time and it turned out to be a fantastic entry point.
    29 Jan 2014, 10:14 AM Reply Like
  • Joe Newton
    , contributor
    Comment (1) | Send Message
     
    It;s about time this dog moved. I still don;t believe it. Look at their past record.
    29 Jan 2014, 08:24 AM Reply Like
  • chopchop0
    , contributor
    Comments (3950) | Send Message
     
    it got caught at a bad time with a big acquisition thanks to the Kuwait government not holding up their end of the bargain. They were awarded billions in court.

     

    It's been a winner since I added at $8/share in 2009 :) They are also benefiting from the cheap domestic crude/price spread in terms of their input costs.
    29 Jan 2014, 10:15 AM Reply Like
  • Coolbluelake
    , contributor
    Comments (585) | Send Message
     
    Hard to believe DOW is in the $40's as most big domestics have prospered.
    29 Jan 2014, 09:31 AM Reply Like
  • RRR77
    , contributor
    Comments (7) | Send Message
     
    Buyback is real bid which come to the Market as well. 3times increase of buyback programm volume means that you got 3times bigger bids from the board. It's really bullish sign.
    29 Jan 2014, 12:45 PM Reply Like
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