Tuesday, December 13, 2011

Share Buybacks, Part 4

Taking a sampling of the 41 PKW Buyback Achievers I could find XBRL annual reports on, there are a number of interesting points. The mean buyback rate for 2010 was 7.3% of common stock shares outstanding (DEI). Given this data point, IBM's rate of buyback seems only a middling one. I would caution generalization from a single year's worth of data, but it does provide a little perspective. A particular high or low buyback rate does not mean much by itself. One has to consider where the money for the buybacks is coming from and how is the rest of the business doing. The best performer (FIS, Fidelity National Information Services) in the sample bought back 19% of outstanding shares in 2010, and coincidentally one of the few names in the green today. FIS is the the "world's largest provider of banking and payments technology" according to their press releases. The company dropped an attempt to buy out a UK-based software company Misys at $2.4B in August. In November, the board approved a plan to buy back another $500 million worth of common stock. Subsequently, the company issued $150 million worth of senior notes in the beginning of December. The company's debt to equity ratio isn't particularly high at 0.72. In fact, overall debt levels have actually been declining. For the past decade, the company has grown primarily through acquisition sometimes through a dilutive stock swap. The astounding amount of share count reduction ~72 million shares was due primarily to a "leveraged recapitalization plan to repurchase up to $2.5 billion" worth of the outstanding shares in July 2010. The actual cash repurchase program only amounted to about 1.4 million shares that year.

Standard Dev.4.20

This is a follow-on to my previous posts on the PKW Buyback Achievers: Part 3, Part 2, and Part 1.

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