Key Points
- Share repurchases can offset dilutive actions and even reduce the share count for a publicly listed stock.
- Reduced share count can boost earnings per share growth and aid dividend health.
- Marketbeat tracks which companies are issuing repurchase authorizations for investors to capitalize.
- 5 stocks we like better than Adobe
Stock buybacks, also called stock repurchases, are important drivers of shareholder value, which is one of the reasons why Marketbeat tracks the data. As the name suggests, a buyback is when a company buys back its own shares from the market.
Buybacks are a form of capital return that can offset the dilutive impacts of share-based compensation and may even reduce the share count. Share count reduction is essential because it reduces the number of times a company is divided among shareholders and provides a lever for share prices.
If company X trades at $100 per share with one million shares on the market, it's worth more per share when the share count is reduced. A lower share count also helps boost earnings growth on a per-share basis and improves dividend health if a distribution is paid; fewer shares mean fewer total distributions paid. More importantly, regarding dividend stocks, a reduced share count aids the outlook for distribution growth by freeing up cash flow that can be funneled into growing distributions for the remaining shares, a significant tailwind for share prices.
Let's take a look at the top four companies tracked by Marketbeat that have issued share repurchase authorizations this year.
Adobe Leverages Share Buybacks: Shares Are Near Long-Term Lows
$462.83 -10.24 (-2.16%) (As of 04/30/2024 ET)
- 52-Week Range
- $331.89
▼
$638.25 - P/E Ratio
- 44.25
- Price Target
- $620.72
Adobe Inc.'s NASDAQ: ADBE share prices are near long-term lows and at levels where the company could step in to support the market. Adobe tops the list of recent repurchase announcements, having issued an authorization for $25 billion or 10% of the market cap at the time of the release. The percent relative to the market cap has increased significantly since then, suggesting a growing opportunity for investors.
The question is whether Adobe's repurchases will move the needle, and the answer is yes. The company leans toward share-based compensation but has reduced its share count over the last year by 0.85%. That’s not a large figure, but accretive to shareholders and supportive of the price action. Analysts also support the price action. The latest earnings release left something to be desired but resulted in numerous reiterated ratings and price targets. The consensus is Moderate Buy with at least a 30% upside.
HCA Healthcare Makes Healthy Repurchases of its Stock
HCA
HCA Healthcare
$309.80 -1.62 (-0.52%) (As of 04/30/2024 ET)
- 52-Week Range
- $215.96
▼
$335.83 - Dividend Yield
- 0.85%
- P/E Ratio
- 15.44
- Price Target
- $313.88
While HCA Healthcare NYSE: HCA doesn't pay a large dividend, it is experiencing healthy growth, allowing for significant share repurchases, and is expected to continue delivering strong capital returns this year. The company tracks in the #2 position with a recent $6 billion authorization worth 7.5% of the market cap when announced. The dividend is worth about 0.85%, with shares near record highs, and investors might expect to see the share count reduced significantly this year because it fell by 5% last year. Analysts rate this stock at Moderate Buy and have been revising targets higher. The consensus assumes fair value for the stock at current price points but is up 17% over the last year and is rising ahead of the Q1 report.
FedEx Delivers Share Repurchase Authorization
$261.80 -4.06 (-1.53%) (As of 04/30/2024 ET)
- 52-Week Range
- $213.80
▼
$291.27 - Dividend Yield
- 1.93%
- P/E Ratio
- 15.10
- Price Target
- $301.33
As tepid as the outlook for freight and shipping, analysts continue to raise their price targets for FedEx Corp. NYSE: FDX. That is partly due to the cash flow and capital returns, which remain robust. The company reduced its average share count by more than 1% in the last report and authorized a new $5 billion share repurchase plan worth 7.5% of the market cap. FedEx also pays a dividend worth nearly 2%, with share prices near a multi-year high. Analysts rate FedEx at Moderate Buy and see it gaining nearly 15% to trade at record levels.
Marvell Technology Adds $3 Billion to its Buyback Plan
MRVL
Marvell Technology
$65.91 -2.84 (-4.13%) (As of 04/30/2024 ET)
- 52-Week Range
- $38.63
▼
$85.76 - Dividend Yield
- 0.36%
- Price Target
- $81.13
Marvell Technology NASDAQ: MRVL added $3 billion to its share repurchase plan, worth nearly 5% of the market cap for this tech stock. That is good news for investors, but it is not the tailwind it could be. Repurchases did not offset share-based compensation over the last year, increasing the share count. However, analysts rate the stock a Moderate Buy and see it advancing 20% at the consensus estimate. The consensus is trending higher and may lead the market to a new all-time high later this year. Analysts see AI driving the business and an opportunity for Marvell to gain market share and post outsized gains.
Before you consider Adobe, you'll want to hear this.
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