Stock_buybacks - Stock Buybacks Offer Shareholders Mixed...

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Monday April 26, 2010 INVESTING March 31, 2010, 11:01PM EST Stock Buybacks Offer Shareholders Mixed Blessings Companies are promising to buy billions of dollars of their own shares. Yet experts warn the benefits of buybacks are often short-lived By Ben Steverman Corporations are once again devoting billions of dollars to stock buybacks, using a record amount of cash on their books to provide a quick reward for shareholders. U.S. public companies have announced plans to buy back $106.1 billion in stock since the start of 2010, according to TrimTabs Investment Research . By contrast, companies announced plans for $132.5 billion in buybacks in all of 2009. In recent weeks, Raytheon ( RTN ), Starbucks ( SBUX ), and PepsiCo ( PEP ) have all boosted their share repurchase plans. On Mar. 15, PepsiCo pledged an extra $15 billion in stock buybacks through June 2013 while also raising its dividend 7%. "The board's action reflects continued confidence in the growth of our business and our commitment to providing strong cash returns to our shareholders," said Chairman and Chief Executive Indra Nooyi in a statement. Raytheon boosted its dividend and said it will buy $2 billion of its stock. On Mar. 24, Starbucks expanded a buyback program and announced its first dividend. In theory, equity buybacks add upward pressure on a stock price while also boosting earnings per share by reducing the number of shares outstanding. They also can betray a lack of more productive uses of cash. "Stock buyback programs represent a failure of management to find attractive internal investments," says John Brady,
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This note was uploaded on 03/06/2011 for the course FN 361 taught by Professor Larson during the Spring '11 term at Clarkson University .

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Stock_buybacks - Stock Buybacks Offer Shareholders Mixed...

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