Are you looking for stocks to buy for buyback boosts?
On June 11, General Motors (NYSE:GM) announced a new $6 billion stock buyback program. That was on top of the accelerated share repurchase it did last November, and there was $1.4 billion left from its previous share repurchase plan. It is certainly an option.
In terms of dividends and share repurchases, GM returned $2.8 billion to shareholders in 2022, plus $11.6 billion last year. It expects to return $1.7 billion in the first six months of 2024 through June 30.
While the auto maker is a big buyer of its stock, it’s not the largest in the S&P 500 by any means.
What makes a good buyback? Generally, it’s when excess cash is returned to shareholders when all other levers have been exhausted, such as dividends, debt repayment, acquisitions and internal investments in its business operations.
Who are the good share repurchasers? Here are three companies that are doing it right.
Apple (AAPL)
Apple (NASDAQ:AAPL) announced its quarterly earnings May 2. They exceeded analyst expectations. However, it was the iPhone maker’s plan to buy back an additional $110 billion of its stock that got investors excited.
Not only was it the largest buyback in U.S. history, it exceeded its own record of $100 billion set in May 2018. In fact, Apple accounts for six of the 10 largest. Apple’s six share repurchase announcements add up to $555 billion since 2018.
“‘An astonishing number,’ said Steve Sosnick, chief strategist at Interactive Brokers LLC. ‘Apple may be acknowledging that they are becoming a value stock that returns money to shareholders rather than a high powered growth stock that needs its cash for R&D or expansion,’” Bloomberg reported on May 2.
While we know it generates a ton of cash from its business, it’s vital that Apple be smart with its excess cash outlays for its shares.
In fiscal 2018 (September year-end), Apple bought back 405.1 million of its shares for $73.1 billion, an average price of $180.45. However, on a post-split basis — its shares split four-for-1 in August 2020 — it was $45.11. That’s a compound annual growth rate of 29.7% over the past six years.
AAPL investors have been loving these buyback boosts. I would gladly take that kind of annual return on my investments.
Adobe (ADBE)
Adobe (NASDAQ:ADBE) reported Q2 2024 results on June 13. They beat the analyst estimates with sales of $5.31 billion and earnings of $4.48 a share, which was 9 cents better than the consensus.
The quarter was so strong that it raised its outlook for the year to $18.10 a share in earnings on $21.45 billion in revenue. The earnings outlook is 10 cents above analyst expectations. Its shares jumped 15% on the news.
On March 14, Adobe announced a new stock repurchase plan for $25 billion, good through March 14, 2028. That’s approximately 11% of its outstanding shares.
“Our new $25 billion share repurchase authorization underscores what a special company Adobe is, with the profitability and cash flows to drive growth and invest in innovation while returning significant capital to our shareholders,” said Dan Durn, executive vice president and CFO, Adobe.
In the second quarter, it repurchased $2.5 billion of its stock at an average price of $543.48, higher than its current share price. However, in fiscal 2023 (November year-end), it repurchased $4.61 billion of its stock at an average price of $400.87, a return of 30.3% in less than a year. This makes ADBE a stock to consider for buyback boosts.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) announced on June 12 that it was adding $20 billion to its 2022 share repurchase authorization, which has no expiry. It now has $21.8 billion to repurchase its shares.
In its announcement, the company said that it would return most of the free cash flow from its Machinery, Energy & Transportation (ME&T) segment to shareholders through share repurchases and dividends. Caterpillar has paid a dividend since 1933 and is a member of the S&P 500 Dividend Aristocrats Index.
In the first quarter, Caterpillar paid $5.1 billion in dividends and share repurchases. In 2023, it repurchased $4.98 billion of its stock and paid out $2.56 billion in dividends. The company’s average price paid for shares repurchased was $255.83. That’s a return on investment of over 27% in less than one year.
The $20 billion share repurchase added to its existing plan is nearly 13% of its shares outstanding.
Its ME&T free cash flow in 2023 was $10.03 billion, nearly double what it was a year earlier. It paid 75% of that for dividends and share repurchases.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.