Thursday, December 25, 2014

IBM: Capital Returns To Shareholders Aren't Financial Engineering

Summary

  • Financial engineering is an overused term when a company does a large-scale stock buyback program.
  • The weak results of IBM are well documented, but the FCF remains strong compared to the market valuation.
  • The recent 15% net payout yield is a strong buy signal.
With the recent collapse of International Business Machines' (NYSE:IBM) stock, lots of questions surround the large stock buyback. When a company uses FCF (free cash flow) and even issues debt to repurchase shares, some in the investment community - including an article by Stock Market Sherpa - like to proclaim financial engineering has occurred. By making that statement, it suggests that the company is undertaking something to deceive investors.


Read the full article at Seeking Alpha.


 Disclosure: Long IBM. Please read the disclaimer page for more details.

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