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

Includes: CRRC, FHN, HSIC, RLD
by: The Value Investor

This week, I will run you through the most important buyback announcements for the week of April 16 - 20, which turned out to be a quiet 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.

Henry Schein (HSIC) the provider of healthcare and technology services plans to buy back $200 million of its own shares in a new buyback plan. The program is an addition to the August 2011 repurchase program under which $38 million is still authorized. In total the $238 million which is authorized is sufficient to retire 3.5% of shares outstanding based on the current valuation of $6.7 billion. The announcement comes after shares in Henry Schein have reached all time highs as shares have doubled over the last three years. The company currently does not pay a dividend.

First Horizon National (FHN) the bank holding company with operations in the state of Tennessee announced a $200 million buyback program. The plan should be executed by January 2013 through open market purchases or in privately negotiated transactions. The $200 million plan is sufficient to retire 8.7% of its outstanding shares based on First Horizon's current valuation of $2.3 billion. The announcement comes after shares trade at the lows of the decade around $9 per share after falling some 75% over the last ten years. Furthermore the board of directors authorized a $0.01 quarterly dividend.

RealD (RLD) the global licensor of three-dimensional technologies announced a $50 million repurchase program. The company obtained a $125 million credit agreement which will partially will be used to finance the repurchase program in order "to maximize shareholder value".

Shares in the 3D producer involved in the new Titanic movie rose 3% on Friday after the announcement which is sufficient to retire 7.7% of shares outstanding. Under the program the company could repurchase around 4 million shares at the current share price of $13.

The announcement creates a lot of value for existing shareholders as the company issued 9 million shares at a price of $27.75 by late 2010 in order to finance growth of the company.

Courier Corp (CRRC) a book manufacturing and publishing company announced a repurchase program of $10 million. The program should be executed in the coming year, depending on market conditions. The announcement comes after shares have hit decade year lows around the $10 mark. Besides the program which is sufficient to retire some 7.9% of outstanding shares shareholders receive a very fat $0.21 quarterly dividend for an annual yield of 8.1%

During the last week, there were merely a couple of repurchase announcements totaling not even half a billion dollars, which makes this a really quiet week in terms of buyback activity.

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.