With a lousy market you can get lousy stock prices. At least that what a few companies are thinking. Although we had an 800 point rally to close the week, there are a few companies who feel like the market has given them the opportunity to buy back shares of their company stock.
Microsoft (MSFT, $26.01, up $0.85) said Monday its board approved a plan to buy back up $40 billion of its shares. The company said it has completed its previous $40 billion stock repurchase program and the new buyback expires in September, 2013. The company also raised its quarterly dividend to $0.13 from $0.11.
Although I don’t actively trade options on Microsoft, I have mentioned that at $25, Microsoft is a good stock trade to ride to $27 or $30.
Hewlett-Packard (HPQ, $47.75, down $0.51) also approved the repurchase of up to $8 billion in shares. The buyback comes on top of a previous $8 billion repurchase program started in November that has about $3 billion remaining. The company has about 2.5 billion shares of common stock outstanding.
And finally, Nike’s (NKE, $63.85, up $0.15) board approved a four-year, $5 billion buyback program. Their repurchase program will begin following the completion of its current $3 billion buyback program. Nike had about 492 million shares of “Class B” stock outstanding.
This is usually a bullish sign for the market when companies come in and buy their stock back. It shows the faith that management has in its stock price. Buybacks lower shares that are available to trade and could help increase earnings because of higher revenues on less shares outstanding.
Rick Rouse
Rick@OptionsMentoring.com
