Monday, December 5, 2011

Share Buybacks, Part 3

Following my previous discussions of share buybacks here and here, let's look into the distribution of the share counts for the PKW (Share Buyback Achievers ETF) components. The components of the Share Buyback Achievers exhibit significant diversity in outstanding shares. For this study, I used the outstanding share information from Yahoo Finance which appears to be a rough undiluted number. The mean, median, and standard deviation of share count are 242M, 81M, and 430M respectively. The component with the minimum number of shares outstanding in this fund is homebuilder NVR with a mere 4.98M shares out. Mega-retailer WMT has the most with 3.44B shares.

The distribution of share count is highly skewed with a long tail of high share count companies, which is what one would probably expect.

Zooming in a bit on the main body of the distribution we see that most companies in the fund have a well under 100M shares. Since this is a fund of companies determined to reduce their share count, it looks most of the companies are doing a reasonable job keeping share counts down. The incremental benefit of further share count reductions from these levels is an interesting question. Given the current low-yield, low-growth environment, companies do well to put their large cash hoards to some productive use. A concerted share buyback is one approach. Even some companies not in the PKW are taking advantage of select low equity valuations such as Mosaic (MOS), the $23B market cap fertilizer giant, which recently bought up $1.2B worth of its own shares to mitigate the dilution due to shares from a complicated spinoff arrangement flooding the market.

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