Tuesday, December 20, 2011

Oracle Announces Additional $5B Stock Buyback Program

Though missing earnings and revenue estimates, Oracle (ORCL) announced an additional $5B stock buyback program. Unfortunately the earnings report lacks details on the Q112 details regarding stock buybacks.

Having a model that focuses on Net Payout Yields (NPY), combination of net stock buybacks and dividends, these headlines naturally grab our attention for future additions to the model.

Considering ORCL has a roughly $150B market cap, a $5B stock buyback is not likely to make the top of the list. The small dividend doesn't help much either. This isn't that surprising as most of the large tech companies have piles of cash and strong earnings, but most of them like CSCO and MSFT still only have NPY yields in the 5-6% range. The companies are cheap on the payouts or the market caps are too expensive to get top yields.

Below is a chart with the NPYs from the last 5 quarters. Note how the net stock buyback has been rather pathetic until the prior quarter:


 

















Yields are picking up and a quick spend of the $5B program would jack up the yield quickly. The model only adds stocks once the buyback occurs and not based on announcements that may or may not be implemented.

ORCL will likely remain on the sideline.


Disclosure: No positions mentioned. Please review the disclaimer page for more details.





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