Corporate Buybacks on the Rise: A Closer Look at Three Major Announcements
Companies often use share buybacks as a means to add value for shareholders. By repurchasing their own stock, they can reduce the number of outstanding shares in the market. This results in higher earnings per share, assuming other factors remain constant. The markets generally view buybacks as a strong sign of a company’s confidence in its future performance, acting as an internal investment.
Buybacks can also offer more flexible tax advantages compared to dividends. In the U.S., dividends are taxed similarly to long-term capital gains, meaning investors pay taxes on them right away. Conversely, capital gains taxes can be deferred until the investment is sold, allowing more capital to remain invested and potentially leading to greater cumulative returns. Below, we’ll explore three U.S. companies that have recently announced significant buyback programs. All market capitalization data and returns were taken as of the close on December 30.
GE Vernova: Powering Progress with a $6 Billion Buyback
GE Vernova (NYSE: GEV), the energy and electrification leader, has unveiled a notable buyback authorization totaling $6 billion. The stock has surged impressively since it was spun off from General Electric, boasting a 152% return in 2024. This buyback now accounts for nearly 7% of the company’s market capitalization.
In conjunction with this announcement, GE Vernova also introduced its first dividend payment of $0.25 per share, resulting in a dividend yield of just 0.3%. This early move to reward shareholders is encouraging for investors. Wall Street analysts have generally reacted favorably, often raising their price targets as more news and earnings reports surface. The company recently secured contracts to supply natural gas turbines for data centers, boosting investor confidence and prospects for growth.
Match Group: Capitalizing on Buybacks and AI Initiatives
Match Group (NASDAQ: MTCH) has made headlines with a substantial buyback authorization of $1.5 billion, which represents 18% of its market capitalization—over double that of GE Vernova. In addition, the company has started offering dividends, with a quarterly payout of $0.19 per share, translating to a dividend yield of 2.3%.
However, 2024 has been a challenging year for Match Group, as its shares have dipped by 10%. The recent Investor Day featured a strategy focused on leveraging artificial intelligence (AI) to boost user engagement, including chatbot features designed to improve user interaction and facilitate real-life connections. Whether these new initiatives will help revive revenue growth—which has remained below 2% in the last quarter—will be critical to watch.
Olin: A Major Buyback Amid Its Revival Strategy
Olin (NYSE: OLN) may not be a household name, but its recent $2 billion buyback authorization certainly stands out, especially as it was raised from an initial $700 million. This amount represents nearly 52% of its market capitalization of just under $3.9 billion. While 2024 has seen Olin’s total return at -38%, the company detailed its recovery plans during its Investor Day.
Olin manufactures a variety of products, including chlorine, epoxy, and Winchester firearm ammunition. Unlike others, Olin does not prioritize rapid revenue growth; rather, it forecasts a growth rate of 3% to 6% annually in its markets over the next five years. The company aims to achieve $250 million in cost reductions by 2028 and plans to return over 50% of its operating cash flow to shareholders through 2029. Analysts are optimistic, projecting a 33% upside based on price targets from Citigroup and Barclays.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
