'Tis the Season for Share Buybacks!
Who doesn't love a gift on Christmas? Better yet, who doesn't love a Christmas gift received early? I know I sure do! Well, that's exactly what investors are up for this holiday season from some of the biggest names on the street. You see, as a sign of confidence in its underlying business, a company may decide to buy back shares. In addition to finding a use for spare cash, buying shares allows a company to reward shareholders who are interested in cashing out, while increasing the ownership of those who still want in on the action. In celebration of share buybacks, I compiled the following list of some of the biggest moves being made that may make your holiday season just a little more joyous!
Macy's brings its A game
When it comes to share buybacks, Macy's is one of the biggest participants. Year-to-date, the $19.3 billion market cap retailer bought back a stunning 27.6 million shares. At $1.25 billion in aggregate, this implies a weighted average share price of $45.29, just 11.6% lower than the company's current share price of $51.26. Macy's repurchased 10.1 million shares in the last quarter alone at a price of $447 million, or $44.26 each.
If this news weren't encouraging enough, shareholders should be thrilled to know that Macy's commitment to buying back shares is extreme. According to its most recent quarterly report, the company still had the capacity under its existing share repurchase plan to buy up $1.75 billion worth of stock. Put another way, Macy's could afford to buy back another 9.1% of its outstanding shares at current prices.
Macy's isn't alone
Sticking with retailers that are engaging in share buybacks, we arrive at Dillard's . At a $4.2 billion market cap, the company is a fraction of the size of Macy's, but this shouldn't convince investors that its ambitions are any less attractive. Year-to-date, the company acquired 3.9 million shares for $301.6 million, or $78.30 per share. Dillard's repurchased 2.4 million of these shares, worth $186.9 million, in its last quarter alone.
Currently, $40.4 million worth of stock is available under Dillard's previous repurchase plan, but management has decided to take things a step further. In an effort to increase shareholder value, Dillard's announced that it was authorizing the repurchase of up to another $250 million worth of shares. Cumulatively, this plan would decrease shares outstanding by nearly 7% if transactions took place at the company's current share price of $91.19.
Brewing up some value
By now, some of you might be thinking that this whole article is only about retailer's buyback plans. Oh, how wrong you are! Next up is Green Mountain Coffee Roasters . With a market cap of $10.3 billion, Green Mountain is a fraction the size of rival Starbucks, but it has some pretty lofty goals.
Between its most recent fiscal year end and now, the company has repurchased 6.99 million shares for an aggregate value of $285.7 million. Under their existing plan, management has the right to acquire another $137.8 million worth of shares. However, this past week, the company decided that's not bold enough. In an effort to show investors that management is confident of the company's prospects, it announced that it would increase its plan by another $1 billion. If completed at the company's current price of $68.77, it would mean that management will reduce shares outstanding by another 11.1%.
In a league of its own
While each of these companies have rather ambitious plans to increase shareholder value through share repurchases, they all pale in comparison to the king of share buybacks. Sirius XM Holdings , the $22.6 billion provider of satellite radio, has taken buybacks to the extreme.
In December 2012, the company announced that it had authorized the repurchase of $2 billion worth of stock. After having repurchased more than $1.6 billion of shares year-to-date, Sirius decided to authorize another $2 billion in repurchases. Of these combined plans, $500 million worth of shares would be acquired from Liberty Media, a majority owner of Sirius. If completed at today's share price of $3.68, the company would buy back 10.6% of its outstanding shares.
During the holiday season, it's always nice to know you have a little cash coming your way. For anyone who owns shares of these ambitious companies, now might be a good time for taking some profits, as these share buybacks will ensure plenty of demand on the open market. However, if you find it more appealing, nothing's stopping you from holding onto these companies for the long run and benefiting from future profitability and share repurchases.
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The article 'Tis the Season for Share Buybacks! originally appeared on Fool.com.
Daniel Jones has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters and Starbucks. The Motley Fool owns shares of Dillard's, Liberty Media., Sirius XM Radio, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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