When a large company announces a major stock buyback plan, the market focuses too much on the headline dollar amount. The real focus should automatically shift to the percentage of the outstanding shares expected to be repurchased in the buyback. In the case of the recent $5 billion buyback plan from Biogen (NASDAQ:BIIB), the plan to reduce the share count by nearly 10% should grab the attention of investors.
Image Source: Biogen website
Huge Net Payout Yield
The announcement of a $5 billion buyback plan is even more noteworthy considering Biogen spent more than $5 billion on buybacks in the last year. The company got very aggressive with share buybacks in the June and September quarters when the stock traded below $240. The net payout yield that combines the net stock buyback yield and the dividend yield topped 12.0% at the peak and is currently at 9.4%.
With the market cap at $55 billion, Biogen would maintain the net payout yield at the 9.4% range by utilizing this buyback over the next year. The yield isn't one of the largest in the market, nor does the stock offer a dividend yield that usually provides more stability for the stock. The key here is watch for whether the biopharma company signals the stock as cheap and appealing at $300 now or whether management waits to repurchase shares on weakness similar to this year.
For Q2, Biogen bought 10.4 million shares at ~$231 for a total value of $2.4 billion. During Q3, the biopharma bought 3.1 million shares at $232 for a total value of $718 million.
As of Sept. 30, the company had ~$3.7 billion remaining under the share repurchase plan from March. In total, the company now has ~$8.7 billion in stock repurchase power for the quarter, and the company rushing out another buyback authorization suggests some
