There are many ways that companies can keep shareholders happy, whether that be through robust growth or consistent dividend payouts.
Companies can also demonstrate a shareholder-friendly nature by implementing share repurchase programs, also commonly known as stock buybacks.
Let’s take a closer look at the benefits and a few recent buybacks that we’ve seen announced as of late.
Benefits of Buybacks
Stock buybacks, also known as share repurchase programs, are commonly deployed by companies to boost shareholder value.
A stock buyback occurs when a company purchases outstanding shares of its stock. In its simplest form, buybacks represent companies essentially re-investing in themselves. Reducing the number of outstanding shares can boost earnings per share (EPS), making a company's financial position more attractive to prospective investors.
Further, buybacks can help put in a floor for shares, reflective of consistent buying pressure.
Still, it’s worth mentioning that buybacks can sometimes bring out critics, as some believe the cash could be better deployed elsewhere, such as R&D. Nonetheless, buybacks are generally a net positive for shareholders, particularly those of mature companies with a much smaller growth runway.
Three Companies That Keep Buying
Several companies, including Builders FirstSource BLDR, Unum Group UNM, and Bank of America BAC, recently unveiled fresh buybacks.
Builders FirstSource
BLDR recently announced a $1 billion repurchase program following the release of its latest set of quarterly results, continuing a recent trend. In fact, the company has repurchased 45% of its total shares outstanding since the inception of its buyback program in August of 2021.
Image Source: Zacks Investment Research
Unum Group
UNM unveiled a $1 billion share repurchase program following its most recent quarterly print in late July, with the company also exceeding both top and bottom line expectations. Like BLDR, the company has repurchased consistently over the last three years.
Image Source: Zacks Investment Research
In addition to the repurchases, Unum has also rewarded its shareholders nicely through consistently higher dividend payouts over recent years, currently boasting a 6.4% five-year annualized dividend growth rate.
Bank of America
Bank of America announced the biggest buyback of the bunch, unveiling a new sizable $25 billion repurchase program alongside an 8% increase to its quarterly dividend payout following its recent earnings release.
No different than those above, the company has regularly bought its shares back over the years, as shown below.
Image Source: Zacks Investment Research
Bottom Line
Companies commonly deploy repurchase programs to boost shareholder value, all of which we’ve recently seen from Builders FirstSource BLDR, Unum Group UNM, and Bank of America BAC.
All three companies have been aggressively buying shares over recent years, helping put in a floor while also aiding EPS. Though buybacks are criticized by some, they make great sense for mature companies with little growth left to squeeze.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
