Share repurchases are an important way in which corporate governance teams seek to return profits to their shareholders. Share repurchases reduce the number of company shares outstanding on the market. As there are fewer shares, the company’s earnings per share increase, all other things being equal. Markets often view buybacks as a vote of confidence in a company’s direction because they reflect the investment the company is making in itself.
Buybacks, which raise stock prices, also provide more tax flexibility than dividends. Dividends paid by U.S. corporations are generally taxed at the same rates as long-term capital gains. However, investors must pay taxes on dividend income when they receive it. Investors do not have to pay capital gains taxes until they sell. This makes it possible to defer tax payment.
This means investors can keep their money invested longer instead of sending it to Uncle Sam. This could potentially lead to larger and more complex profits. Below, I’ll highlight three US companies that have just announced large, and in some cases massive, buyback programs. All market capitalization, return, and growth estimates are as of the December 30 close.
GE Vernova: Electrifying the world and potential profits from share buybacks
GE Vernova today
(As of 1:39 p.m. ET)
- 52 week range
- $115.00
▼
$357.09
- Dividend yield
- 0.30%
- Target price
- $314.35
G.E. Vernova New York Stock Exchange: GEVThe power and electrification equipment giant just announced it has authorized a $6 billion buyback. The stock has fallen sharply since it split from its former parent company, General Electric. A 152% return in 2024 isn’t too bad. The buyback authorization now represents just under 7% of the company’s market capitalization.
At the same time, the company announced its first dividend payment of $0.25 per share. The company’s dividend yield is only 0.3%. But it is a good sign that it is generating returns for shareholders this early in its history as an independent entity. The company was a favorite of Wall Street analysts. On average, they raise their price targets as news and earnings releases come out. GE Vernova recently announced that it has signed agreements to supply data centers with its natural gas turbines. This is a source of investor optimism and long-term growth potential.
Group of matches: Swipe right on Dividends, Buybacks and AI Potential
Group of matches today
(As of 1:34 p.m. ET)
- 52 week range
- $27.66
▼
$42.42
- Dividend yield
- 2.32%
- P/E ratio
- 14.63
- Target price
- $37.68
Group of matches NASDAQ: MTCH also just announced a large buyback authorization. Its market capitalization is more than double that of GE Vernova. The company’s $1.5 billion buyback authorization represents 18% of its market capitalization. Like GE Vernova, the company also announced the start of dividend payments. Annualized, the company’s quarterly dividend of $0.19 per share gives it a dividend yield of 2.3%.
As for 2024 returns, that’s where the similarities to GE Vernova end. Shares fell 10%. At a recent Investor Day, the dating app company laid out its plan to change that. Unsurprisingly, this involves the use of AI. The company is working to implement artificial intelligence to help people find more matches and turn matches into real connections. This includes implementing chatbot-like features that help users respond better and translate an online conversation into an actual date. It will be interesting to see if these new features can reignite revenue growth, which was less than 2% last quarter.
Olin: Materials shares with announcement of large-scale buyback and growth potential of +30%
I was there today
(As of 1:39 p.m. ET)
- 52 week range
- $32.90
▼
$60.60
- Dividend yield
- 2.38%
- P/E ratio
- 27.10
- Target price
- $50.14
Olin New York Stock Exchange: OLN is a lesser-known name, but its recent approval of a share buyback is no small feat. The $2 billion authorization was recently increased from $700 million. With a market capitalization of just under $3.9 billion, resolution represents nearly 52% of the company’s value. Basic materials inventories performed poorly in 2024, delivering a total return of -38%. However, as with Match Group, the company’s Investor Day showed how it plans to get back on the right side of the market.
The company makes a variety of products, including chlorine, epoxy resin and Winchester firearms ammunition. The company is not focused on massive revenue growth. These broad markets are expected to grow 3-6% annually over the next five years. Instead, the company aims to achieve structural cost reductions of $250 million by 2028. It also plans to return more than 50% of its operating cash flow to shareholders through 2029. Wall Street sees significant value in these stocks. The average of two December price targets from Citigroup and Barclays suggests a 33% upside potential for the stock.
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