Cash-Rich Companies Choosing Stock Repurchases Rather Than Dividend Hikes: Part IV

by: The Value Investor

This week I will run you through the most important buyback announcements for the week of 4 March till 9 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 stocks. Investors welcome these announcements as they boost earnings per share and provide a lot of support for the share price during the repurchase periods.

AutoZone (NYSE:AZO) announced an additional $750 million repurchase program, enough to retire 5.0% of outstanding shares. The retailer and distributor of automotive replacement parts and accessories made the announcement after shares trade at an all time high of $380.
Investors it AutoZone do not receive dividends, but have seen their shares increase in value by some 150% over the last two years.

Dick's Sporting Goods (NYSE:DKS) announced a new $200 million repurchase program 3.5%. The sporting goods retailer plans to offset dilution caused by employee-incentive programs and buys back the shares around an all time high of $47 per share. On top of the compensation for dilution, Dick's pays a 1.0% dividend yield.

Qualcomm (NASDAQ:QCOM) the manufacturer of digital wireless and integrated circuit products announced a $4 billion repurchase program and simultaneously raised its quarterly dividend by 16% to a yield of 1.3%. The buyback announcements comes at a time when shares trade around all time high of $64. The main goal of the plan is an attempt to offset dilution caused by employee incentive plans.

Dice Holdings (NYSE:DHX) the smaller online career website and career fair company announced a $65 million repurchase plan, enough to retire 10.2% of outstanding shares. This announcement is made after shares have roughly halved from $18 in 2011 to $10 at the moment. The new plan comes as a replacement of the old plan and is welcomed by investors who do not receive any dividends at the moment.

The Children's Place Retail Stores (NASDAQ:PLCE) The North American children specialty retailer announced a $50 million repurchase program, sufficient to retire 3.9% of outstanding shares. The retailer which does not pay dividends has already retired some 20% of outstanding shares over the last couple of years.

During the last week, these five companies described above announced repurchase plans totaling $5 billion, which is roughly three times their combined annual dividend payment, which came in at around $1.6 billion.

Cash rich companies still refuse to significantly raise long-term dividends, which could send a powerful long-term trust signal. 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.