Mike Ashley launches another share buyback as companies return record amounts of cash to shareholders
Plans: House of Fraser is owned by Mike Ashley
Mike Ashley has launched another share buyback as companies return record amounts of cash to shareholders.
Ashley’s retail group Fraser plans to buy back up to £70m of its shares.
The company, which owns brands including Sports Direct, Jack Wills and House of Fraser, has already repaid around £300m to investors since May.
And figures show that the biggest London-listed companies have already committed to spending nearly £33bn through buybacks this year.
Shell, Rio Tinto and British American Tobacco are among the 29 FTSE 100 companies with huge buyback plans.
Shell is the largest at around £6.3bn, while Aviva is expected to spend £3.8m and consumer goods giant Unilever £2.5bn.
Analysts at AJ Bell believe the surge is on track to break 2018’s record £34.9 billion.
Russ Mold, Investment Director at AJ Bell, said: “It seems likely that 2022 could easily beat this year’s record.”
A company buys back stock as an alternative to paying dividends to return money to investors. As companies recover from the pandemic, many have adopted smaller, more achievable dividend strategies and used buybacks to top up the amount they’re giving back.
This keeps investors happy and can be more tax efficient for them. But it can benefit a company as it supports the stock price and, when earnings are calculated on a stock basis, makes them higher.
Skeptics say this may amount to stock price manipulation.
Those who keep their shares rather than sell them end up owning a slightly larger portion of the company. As for the huge programs planned for his year, Mold said it’s always worth considering whether it’s “financial engineering.”
He added: “It might at least help allay such concerns that the biggest buyback programs are being conducted in sectors that have been out of favor for a very long time and therefore could potentially be cheap – financials (both banking and insurance) and oils , although consumer staples are not far behind.’
The Frasers Group recently increased its stake in Hugo Boss and now owns 4.5 percent. It is believed to be the purchase of shirt manufacturer TM Lewin.
Mike Ashley launches another share buyback
Source link Mike Ashley launches another share buyback