Tuesday screencast: Big Blue buybacks

abnormalreturns
October 26th, 2010

In a screencast a few months ago we noted that IBM had recently issued debt at a yield below its own dividend yield. This is not a unusual situation these days. It should not be surprising that IBM, and other companies, are using this opportunity to announce a new round of stock buybacks. The question is whether shareholders would be better off with higher dividends with the company’s shares now trading near its 52-week highs. Other analysts also note the fact that many share buybacks do not end up reducing shares outstanding, but only sop up shares from options issuance. In today’s screencast we look at this ‘de-equitisation’ phenomenon.

Items mentioned in the above screencast:

Why are companies like IBM borrowing? Because they can. (AR Screencast)

IBM (IBM) announces a $10 billion share buyback authorization. (Bloomberg)

De-equitisation, the case of IBM. (FT Alphaville)

Wouldn’t shareholders be happier with a dividend? (Crossing Wall Street)

Buying stock back at all-time highs is “ridiculous.” (The Reformed Broker)

Daily chart of IBM. (Finviz)

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Tickers: IBM