Lord Wolfson (NEXT CEO) is regarded as an expert on when and why to buyback shares (see link)Https://hollandadvisors.co.uk/wp-content/uploads/2021/03/lord-wolfsons-wisdom-on-share-buybacks.pdf |
Think you miss the point. A BB should as I've posted only happen when the equivalent rate of return is better than the profit generated by investing directly in the business.If the BB reduced the shares in issue by say 10%, then eps will increase 10% from say 100p to 110p without having to increase income. If the market is rating the business at a PE Zof 15x, then the target price pre BB would be 1,500p, post BB the value would increase to 1,650p. BB's are favoured by the US so the rating could increase further plus the same applies because earnings have grown possibly more than forecasted.Cash for Dividends is not investing in the business and as posted previously what dividends?, for BATS medium / long term you've lost divs in capital depreciation. |
Down in the US at the moment |
 disc0: to answer your question as to why I invested....it was to reap a decent dividend and one that pays out four times a year.
If a company has spare cash and is able to buy back its own shares the hope is that the resulting lesser number of shares will each own a little bit more of the company that was the case before the BB.
But that extra value comes at the expense of no longer having the cash sat in the bank account. So, it could be saif the company is less valuable without that cash.
It diminishes the ability to pay a dividend of an equal value to that paid in the previous year - particularly when profits may not have been as healthy as that previous year. The flexibility of using cash reserves to boost divi. in tough times has been spent on the BB.
Now, if the theory of an increased share price really does result from the BB, and it often doesn't or at best, isn't overly obvious, then my own share valuation will have increased but given I didn't sell my shares when they fell significantly I'm not enamoured by the fact they've risen.
That dividend I'm after, it NOW buys a lesser number of shares than it would have done before the BB - again assuming the BB really did raise the share price
To sum up, it is hard to determine if a BB has done the job of raising the share price It is very evident though that the money used has now gone and any alternate uses for that cash have been blown. |
There is an increase to the business if the equivalent rate of return is in excess of what they'd have to invest in the business to get the same return to their bottom line. It's an investment the same as you buying shares, so could ask why did you?!!.Plus an increase in eps (yes if profitable) will be reflected in their rating and increased valuation of the stock.Not saying I'm in favour of BB's, I'm on the fence tbh, it just doesn't influence me to either invest or not in the business. |
disc0: there is no return on money spent on BB's.
There's an increase in earnings per share - or increse in loss per share if a profit isn't made.
With debt reduction there's an immediate saving insofar as interest is no longer paid on that debt.
I would never countenance a BB with any major debt in existance. |
“The big money is not in the buying and selling but in the waiting.” Charlie Munger (1924–2023).
“The stock market is a device for transferring money from the impatient to the patient.”
Warren Buffett.(Still at the crease). |
Have to disagree given the share price here is back to where it was in 2010. Don't like to see BB's when there's debt on the balance sheet but it's all about the equivalent rate of return. |
GE was a great business under Lord Weinstock.Lord Simpson was an idiot. |
We don't want them to high on 1st Feb, payday with our dividend reinvestment. More bang for our buck, lower the shareprice, lol. |
monty: the share price is now heading in the right direction without the assistance of any buy back. The time to have used a BB efficiently has passed. |
“The big money is not in the buying and selling but in the waiting.” Charlie Munger (1924–2023). |
Last year dog of the year, will it turn out best in show this year, we want increased dividend and if possible buybacks, also don't sell the stake, the jewel in the crown, ITC. |
Weinstock must have been turning in his grave Shocking destruction of a great business GEC to Marconi |
lippy4: I like those kind of stories. They make the thread more human. Thanks. |
in the US the price is climbing equivalent to 2396p at the moment. Quite often it falls back at the end of the trading day |
good point redbaron10 |
Car1pet ITC and Japan Tobacco are conglomerates with various interests.Both have hotels,ITC has an agri-business,JT has a food processing business.Diversifying into growth areas outside tobacco isn't impossible but I'd like a lot of due diligence first if they plan such a move.I remember GE before Lord Simpson turned it into Marconi and see how that ended! |
In a roundabout way, Bats is a cheap way to have an interest in a great company ITC, if you fancied ITC. |
#Montyhedge, the ITC holding is indeed a jewel, a 37% FY CG and 29% of the dividend paypout.. :o)
The Groups interest in ITC decreased from 29.38% in 2021 to 29.19% in 2022
The Groups share of post-tax results of associates and joint ventures increased from £415M to £442M which largely relates to the performance of the Group’s main associate, ITC Ltd (ITC) in India. The Group’s share of ITC’s post-tax results was 22.7% higher at £514M (2021: £419M).
Added a few more BATS this morning and will continue to do so through H1, the steep discount and 10% yield makes it a great buy for income, yes there was a write down, but I doubt it will impact the dividend.. |
Given the future for smoking is looking problematic could BATS re-invent itself and use its cash to transition into a different business for example manufacturing batteries for EVs or new businesses not even thought of. What are the best opportunities for the next 20 years |
Also you forgot to mention year to date ITC up 39.7%, it's the jewel in Bats crown for me. |
British American TobaccoBritish American Tobacco's (BATS) 2023 organic revenue growth is now expected to come in at the bottom of the 3-5% range, as US combustible sales stay under pressure. That's seen pressure on the valuation over 2023. And while these headwinds are likely to continue in the new year there's still room for hope.New Categories are expected to have been broadly breakeven last year, two years earlier than originally thought. The group has set a punchy goal for non-combustibles to drive 50% of revenues by 2035. We see regulatory scrutiny as the biggest potential blocker here.Our case for BATS centred on its strong cash generation. With expected cash conversion of close to 100% we still think the company's well placed to make the necessary investments to keep pivoting away from cigarettes.It also leaves room to support an attractive dividend yield, which is now in double digit territory after a steady decline in the company's market value. As ever though, there are no guarantees and yields are not a reliable indicator of future income.The weakness in the valuation suggests that there's still a job to be done in convincing investors that New Categories can underpin BATS' future. Successful execution of the strategy could well drive a re-rating, but it won't be an easy task. |
I dont think they overpaid for Reynolds this was one of the last big deals in the tobacco industry the issue was afterwards. They should have rebased the dividend and over the last couple of years refinanced and extended all the maturities of their debt at rock bottom rates. Anheuser or Vodafone have excellent debt profiles for example. |
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