Over the past few years, I've been conducting quarterly reviews of companies that are aggressive repurchasers of their own stock.
I've tended to focus on companies that announced a share repurchase plan that represents at least 5% of shares outstanding. Anything smaller may not have much of an impact on earnings per share ( EPS ).
Yet in recent months, we have broadened our measure of corporate generosity to focus not just on buybacks but also dividends and debt reductions.
Below you'll find a group of companies that meet the criteria, based on share buyback announcements during the current earnings season.
Apple
The billions Apple Inc. (NASDAQ: AAPL) has spent buying back stock likely will continue beyond its current massive buyback plan. Apple spent roughly $3 billion in first quarter of fiscal 2016 at an average price of $115.45 per share and spent over $6.8 billion in the fourth quarter of 2015.
Its November 2015 accelerated share repurchase period will end in or before April 2016. At December 26, 2015, Apple saw its share count drop on a diluted basis to 5.594 billion from 5.881 billion a year earlier.
AIG
Activist Carl Icahn is after American International Group Inc. (NYSE: AIG), which has been buying back stock and is fighting efforts to unwind the company into several companies. On February 11, 2016, AIG raised its dividend but also increased its share repurchase authorization by $5.0 billion. AIG actually already has been an active buyer of its own shares so far in 2016. The company said:
Boeing
Though Boeing Co. (NYSE: BA) may have seen a severe drop in its share price, this may only give it more room to buy back shares. Its board of directors recently hiked its dividend more than expected and boosted its authorization for its share repurchase program to $14 billion, replacing Boeing's prior $12 billion authorization approved in December 2014, and the company signaled that some $5.25 billion remained available for purchase at the time.
Cisco
Though Cisco Systems Inc. (NASDAQ: CSCO) has now spent close to $100 billion, a fresh debt offering and buyback hike shows no end in sight to its buyback ambitions. On top of a 24% dividend hike from February 2016, its board of directors also approved a $15 billion increase in its stock repurchase program. Cisco said that as of January 23, 2016, it had repurchased and retired a grand total of 4.5 billion common shares at an average price of $20.97 per share, for a total spend of about $95.1 billion since it began buying back shares.
GE
In late 2015, General Electric Co. (NYSE: GE) said that its Synchrony Financial share exchange would reduce the outstanding float of GE common stock by about 6.6% (the equivalent of approximately $20.4 billion in GE stock buyback). If you straight-line GE's plans, Jeff Immelt could spend another $20 billion or more just in 2016 alone. It should also be noted that GE shares at the $27.75 low in February were down more than 10% from the last day of 2015 alone.
GM
General Motors Co. (NYSE: GM) may face the "peak auto" argument, but the company refuted this with its most recent earnings and buybacks. Yet, GM's low of $26.69 in early February had its shares down a whopping 21% from the end of 2015 alone. GM also aimed to smooth over fears of excessively weak international sales. The board increased its quarterly dividend, but the big news was that it raised the stock buyback plan to $9 billion from a prior $5 billion, with an end date in 2017. At that time this represented close to 300 million shares that can be repurchased.
GM shares were trading at $28.30. The 52-week range is $24.62 to $38.99, and the consensus price target is $38.63. The buybacks compare to a market cap of $43 billion.
Gilead Sciences
It may seem odd that Gilead Sciences Inc. (NASDAQ: GILD) is buying back stock rather than increasing its drug pipelines and acquiring companies to keep its growth going. Maybe it is because it is valued at only eight times expected earnings. Gilead's board of directors recently approved the repurchase of an additional $12 billion of its common stock. This buyback is to start on completion of an existing $15 billion repurchase program authorized in January 2015.
As of December 31, 2015, approximately $8 billion remained in the prior buyback program, so it spent $7 billion buying shares in 2015. What stands out here is that Gilead said that it intends to utilize $5 billion of the remaining January 2015 program in an accelerated share repurchase program, so its total buybacks for 2016 could easily eclipse the buybacks of 2015.
Home Depot
It may have just raised its dividend, but Home Depot Inc. (NYSE: HD) plans to complete its $11 billion share buyback by repurchasing another $5 billion in stock in 2016. In the start of 2015, that buyback plan was actually $18 billion through the end of fiscal 2017, and Home Depot said that since 2002, through February 2015, it had returned more than $53 billion of cash to shareholders via share buybacks, retiring some 1.2 billion shares. Home Depot has targeted a dividend payout ratio of approximately 50%, and excess capital after funding the needs of the business will go toward repurchasing shares.
IBM
Despite being a serial acquirer of its stock, International Business Machines Corp. (NYSE: IBM) has slowed its repurchase activity as criticism of engineered earnings growth has grown louder. IBM may raise its buyback plan ahead, but its earnings in January 2016 said:
Johnson & Johnson
In late 2015, Johnson & Johnson (NYSE: JNJ) disclosed that its board had approved a $10 billion share buyback plan. That new plan has no time limit, and the company had about 2.77 billion shares outstanding at the end of the third quarter. The company has bought back shares for years and years, having had prior $10 billion share buyback plans as well.
McDonald's
The official line at McDonald's Corp. (NYSE: MCD) is that it remains committed to returning excess cash to shareholders through dividends and share repurchases. The Golden Arches is also still involved in a turnaround. It announced late in 2015 that it was targeting a $30 billion capital return plan over the three-year period ending in 2016. The company was aggressive enough that it even was willing to accept a lower credit rating to accommodate that plan with the issuance of debt. McDonald's has roughly $10 billion expected to be returned to shareholders by the end of 2016.
Microsoft
Microsoft Corp. (NASDAQ: MSFT) had roughly $100 billion in capital and may spend more than $10 billion in share buybacks in 2016. The company has joined the many tech giants raising debt to get cash inside the United States without the repatriation penalties. The use of proceeds was said to be for general corporate purposes, but the stock buyback line was used in there as well.
Moody's has been on record saying that Microsoft will complete a remaining $31 billion stock repurchase plan by the end of 2016. Another issue to consider is that, while Microsoft's $3.6 billion spent on buybacks in the fourth calendar quarter of 2015 was the smallest of the four quarters in 2015, it has averaged north of $4 billion in buybacks over the past year. Microsoft shares were last seen down about 7% so far in 2016.
Nike
A top performer in 2015, Nike Inc. (NYSE: NKE) generally is not considered a large buyer of its own shares. After all, it has a premium valuation to the market. Its shares were last seen down about 3% so far in 2016. What stood out with its earnings report in November was the aggressive buyback plan on top of a stock split and dividend hike.
Schlumberger
Schlumberger Ltd. (NYSE: SLB) is far from alone in the world of oil and gas services companies in facing a challenging business climate. But on top of being able to make acquisitions, Schlumberger is a big buyer of its own stock. The company may have done what employees hate to see by making some 10,000 layoffs with lower capital spending plans while approving a new $10 billion repurchase program.
Schlumberger already repurchased 5.4 million shares of stock in its fourth quarter at an average price of $73.86 per share for a total cost of $398 million. Now consider how much of the buyback matters when you hear that Schlumberger shares were last seen up 4% so far in 2016. An oil company stock up this year?
3M
Already a capital returning company, 3M Co. (NYSE: MMM) seems almost more eager than ever to buy back stock after a solid dividend hike. 3M's most recent board approval was for the repurchase of up to $10 billion worth of its outstanding common stock. This plan replaced its prior plan and has no official expiration date.
3M is not a stranger to returning capital to its shareholders. It announced an impressive $12 billion share buyback plan back in 2014. 3M’s history at that time showed that it had spent $5.2 billion on buybacks in 2013, up from $2.2 billion in 2012. Its stock was down handily for the year in January, but the market recovery (and perhaps buyback assumptions) has now driven shares up over 15% from the January lows, and 3M shares were last seen up by over 4% so far in 2016.
United Technologies
Though it now may be involved in a Honeywell merger chase, United Technologies Corp. (NYSE: UTX) returned $12 billion to shareholders in 2015 via buybacks and dividends. Its board had authorized a new $12 billion share repurchase program in late 2015, which includes the $6 billion accelerated share repurchase using the net proceeds from the Sikorsky sale to Lockheed Martin.
Wal-Mart
Wal-Mart Stores Inc. (NYSE: WMT) has been and will continue to be a serial acquirer of its own stock. The company has run into sales growth problems at the same time that higher wages to millions of more workers are adding on to its costs structure at the expense of earnings for shareholders. Wal-Mart announced last October that its board of directors authorized a new $20 billion share repurchase program and that it had retired the $8.6 billion remaining on its 2013 authorization.
Wells Fargo
It may be the current king of banks by market cap ($239 billion), but Wells Fargo & Co. (NYSE: WFC) also is trading at the largest premium to its book value. So what are investors supposed to think of a recently announced expanded stock buyback plan? This bank has had and continues to have a long-term pledge to keep buying back its common stock. The Wells Fargo board of directors lifted its authority to repurchase common stock by an additional 350 million shares recently, which would come to over $17 billion at the time.
Time has proven over and over that Wells Fargo has done well by its buybacks, with billions and billions in phantom profits if it was buying the stock for a trade/investment rather than for retiring shares. One interesting point here is that as Wells Fargo buys back ever more stock, it keeps driving up the percentage owned by Warren Buffett, with a stake of 479.7 million shares already about 9.4% of the outstanding shares.
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