Yahoo Finance CBA, ANZ, NAB and more offer buybacks: What are they?
It’s reporting season in Australia, which means it's time for Aussie companies to tell their shareholders, and the broader market, how they have been performing.
Companies will either provide their half year or full year results, announce a dividend if they are paying one and perhaps even announce a buyback.
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But what is a buyback? Why do companies do them and which companies are offering one?
What is a buyback?
A buyback can sometimes also be known as a share repurchase and basically means the company is offering to buy its own shares back.
In other words, the company is offering you the chance to sell the shares you own in that company back to them for a set price.
This allows the company to reduce the number of shares available in the market as well as giving the former shareholder a nice lump sum payment.
Why do companies offer buybacks?
There are a number of reasons why a company might decide to do a buyback, according to Investopedia.
One of which is to invest in themselves by reducing the number of shares on the market. This will also increase the proportion of shares owned by investors.
If a company thinks it is undervalued on the market it might be a buyback to give other investors a better return.
Another reason for a buyback is more to the benefit of the companies than to their shareholders.
A business may decide to do a buyback to give better compensation to their employees and executives.
Because many of the large ASX companies offer shares as a reward to executives, a buyback means the company can avoid diluting the value of existing shareholders.
Essentially, if there are less shares floating around the market, then each one will be worth a greater portion of the company. It’s the difference between slicing a pizza into 12 slices versus six.
Which Aussie companies offer buybacks?
Here is a list of all the major companies in the ASX 200 that have offered buybacks this reporting season.
Commonwealth bank
CBA (CBA.AX) has offered its shareholders a buyback up to the value of $6 billion - significantly more than most investors had been expecting.
The bank said it plans to buy back around 3.5 per cent of its shares which it will then cancel to reduce the amount of overall CBA shares.
National Australia Bank
NAB (NAB.AX) launched a $2.5 billion buyback to reduce shares on issue and boost returns to investors.
NAB was able to do the buyback because it had around $8.5 billion in extra capital after it successfully raised over $4 billion last year.
ANZ Bank
ANZ (ANZ.AX) will buy back around $1.5 billion of shares. This suggests the bank has extra cash and feels confident it can support investors and customers.
Remember, companies usually launch a buyback because they are investing in themselves.
Telstra
Telstra (TLS.AX) announced it would return around 50 per cent of its profits from it’s InfraCo Towers transaction through a $1.35 billion buyback.
Telstra CEO Andrew Penn said the transaction reinforced that the telco’s infrastructure assets could deliver additional value for shareholders.
Suncorp
The insurance giant had a profitable year, so it decided to offer investors a special dividend and a $250 million buyback.
Suncorp (SUN.AX) saw its full year earnings up 42 per cent compared to the previous year.
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