IB Net Payout Yields Model

Net Payout Yields Updates

Below are a few updates on the net payout yields of companies in our model that just reported. Always interesting to see what a company did with stock buybacks during a very weak stock market.

Chubb (CB)

CB reported Q3 numbers after the close on Thursday. The company continues to reduce the outstanding shares as the count has dropped by 30M shares or roughly 10% in the last year.

CB was active in the quarter buying roughly 2.5% of the outstanding shares and more impressively at prices over $5 below the current market value of $65.35. Also, the 8M shares repurchased was an increase from the average in the first six months of below 7M a quarter.

With a buyback yield of roughly 10% combined with a 2.5% dividend yield, CB maintains a very appeals 12%+ net payout yield.

  • During the third quarter, Chubb repurchased 8.0 million shares of its common stock at a total cost of $480 million (an average of $59.97 per share).  As of September 30, 2011, there were 6.9 million shares of common stock remaining under the current repurchase authorization.
  • Average diluted shares outstanding for the third quarter were 287.8 million in 2011 and 317.3 million in 2010.
  • During the first nine months of 2011, Chubb repurchased 21.6 million shares of common stock at a total cost of $1.3 billion (an average of $61.24 per share).

Microsoft (MSFT)

Also reported after the close on Thursday. MSFT repurchased $1,934M worth of stock but issued $336M worth of stock for a net $1.6B. A lot of cash for normal companies but not overly impressive for a market cap north of $220B. It also comes as a dramatic drop from the $4,339M bought back last year with a net $4,222M.

Maybe MSFT is holding back with the purchase of Skype and the rumored potential deal for Yahoo (YHOO). Otherwise, these numbers are disappointing considering the opportunity of weak equity markets in Q3.

Regardless, these numbers place MSFT as the very low end of attractive net payout yields at around 6%.  The dividend yield at 2.9% will attract many investors. Unfortunately a good yield is no longer good enough for our model where yields can easily surpass 10% these days.

Disclosure: Long CB and MSFT (will likely sell within the next 72 hours). Please review the disclaimer page for more details. 


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