Many guru investors favor companies that have a steady history of repurchasing their shares because it increases earnings per share, increasing their ownership of the company, reduces the risk of dilution from issuing new shares and indicates shareholder friendly management.
There are a number of large-cap companies in the U.S. that prioritize share buybacks. For example, using the screener, you can find U.S.-domiciled companies that have a market cap of at least $100 billion and have been buying back their shares at a rate of 3% annually over a 10-year period. They are: Comcast Corp. (CMCSK), Home Depot Inc. (HD), International Business Machines Corp. (IBM), Microsoft Corp. (MSFT) and Exxon Mobile Corporation (XOM).
Also, see the details of the companies’ buyback history on their individual 10-year financials page.
Comcast, the global media and cable company that owns almost half of NBCUniversal, has a robust history of returning cash to shareholders via share buybacks, taking the top spot for large-cap companies in the U.S. Over the past 10 years, Comcast has bought back shares at a rate of 7.7% over the past 10 years. That means it reduced its share count from 5.073 billion in 2003, to just 2.651 billion in 2012.
Future plans for share repurchases and dividends were announced on Feb. 12. Comcast said it would buy back $2 billion of its stock in 2013, subject to market conditions. This is down slightly from the $3 billion it spent repurchasing 3.5% of its common shares 2012.
In 2013 the company is also increasing its dividend 20% to $0.78 per share on an annualized basis.
Comcast’s stock has increased 100% over the past 10 years. The $107.6 billion market cap company trades for $40.67 on Wednesday, and has a P/E of 17.86, P/B of 2.2 and P/S of 1.74, which is close to a three-year high.
Home Depot Inc. (HD)
Second place in the pack goes to Home Depot, the do-it-yourself home improvement store, which has been repurchasing its shares at a 4.9% clip over the past 10 years. Home Depot chiseled its share count all the way from 2.283 billion in 2003 to 1.499 billion as of January 2013.
Home Depot has a culture of returning excess cash to its shareholders as dividends and share repurchases, and has a policy of paying out approximately 50% of its net income in dividends. Its total of 74 million share repurchases in 2012 cost $4 billion. A new program has been set in place targeting $17 billion in share repurchases by the end of 2015. The company has spent a total of $37.5 billion on share repurchases since 2012.
In 2012, Home Depot’s dividend increased to 34% to $0.39 per quarter, or $1.56 annually.
At $73.28 per share on Wednesday, Home Depot shares have gained 168% over the past 10 years. The company has a market cap of $108.86 billion and P/E of 24.38, P/B of 6.18, and P/S of 1.48, all three of which are near their respective 10-year high.
International Business Machines Corp. (IBM)
IBM has been repurchasing its shares at a rate of 4.9% over the past 10 years. Repurchase activity over that period dropped its share count from 1.722 billion to 1.11 billion, as of March 31, 2013.
IBM, an information technology company offering global technology and business services, software, systems and financing, returned $3.5 billion to shareholders in the first quarter of its fiscal 2013. Of that, $2.6 billion was spent on share repurchases, and $0.9 billion went to dividends.
For the full-year 2012, IBM returned $15.8 billion to shareholders – $12 billion in share repurchases and $3.8 billion in dividends. It was also the 97th consecutive year the company paid a dividend and the 17th in which it was increased. A total of $123 billion went to share repurchases at IBM since 2000, reducing its outstanding share count by over 35%.
According to the company’s 2015 roadmap, it will allocate another $50 billion to share repurchases and $20 billion in dividends over the period the plan covers.
IBM in the past 10 years saw its share price increase 128%. The $214.21 billion market cap company trades for $191.71 per share on Wednesday, with a near two-year low 13.22 P/E, 11.2 P/B and 2.1 P/S.
Exxon Mobil Corporation (XOM)
Exxon Mobil Corp. bought back shares at a 4.3% rate over the past 10 years, bring its total share count down from 6.639 billion in 2003 to 4.541 billion in 2012.
Exxon, the oil and natural gas company, distributed $30 billion to shareholders in dividends and share repurchases to reduce shares outstanding in 2012. The company also increased its dividend 21% in the fourth quarter to $0.57 per share.
In the past 10 years, Exxon shares have gained 155%. They trade at $89.43 per share on Wednesday, with a 9.23 P/E, which is close to a three-year low. The company’s P/B of 2.36 is close to a two-year low. Exxon also has a P/S of 0.857and $394.68 billion market cap.
Microsoft Corp. (MSFT)
Finally, Microsoft Corp. has bought back shares at a rate of 3.2% annually over the past 10 years. Its share count over that period has declined from 10.723 to 8.364.
Microsoft, the software and hardware company founded by Bill Gates, has been busy fulfilling its 2008 share repurchase program of $40 billion which expires on Sept. 30, 2013. For the year ended June 30, 2012, it repurchased 142 million shares in transactions totaling $4 billion, compared to $11.46 billion in 2011.
As of March 31, 2013, Microsoft had not yet renewed or replaced the share repurchase authorization, and had $4.6 billion remaining under it, after repurchasing $1 billion on buybacks that quarter.
Near a five-year high at $31.76 per share on Wednesday, Microsoft shares have gained 25% over the past 10 years. The company has a $265.23 billion market cap, 16.37 P/E, 3.9 P/B and 3.42 P/S.
See more companies buying back their shares by trying the All-in-One Guru Screener here.