IBM Buybacks So Big, Almost Taking Itself Private (IBM)

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International Business Machines Corp. (NYSE: IBM)  is at it again with returning capital.  The company announced this morning that it declared a regular quarterly cash dividend of $0.65 per share.  More importantly, IBM has authorized $10 billion for a share buyback.

The buyback is listed as additional funds for use in its stock repurchase program that can be in the open market or via private transactions.  The new $10 billion in funds is in addition to approximately $2.3 billion remaining as of the end of last quarter in September.  More importantly is another note, “IBM expects to request additional share repurchase authorization at the April 2011 board meeting.”

The company has now returned roughly $91 billion to its stockholders since 2003 via share repurchases and dividends.  Perhaps the biggest shocker here is that IBM is doing this when shares are effectively near all-time highs around $143 that were recently put in before its most recent earnings.  IBM’s market cap today is close to $175 billion, making the buyback close to 7% of its entire value.  The company ranks around #8 or #9 by market cap in our proprietary Real-Time 500 that measures that 500 largest companies by market cap in the U.S.

When a stock is at all-time highs, many say that valuations have to come into play.  That might not be the case if you consider that IBM trades at about 11-times the forward earnings estimate of $12.56 EPS from Thomson Reuters for the Fiscal-2011 period.

IBM is the largest DJIA component due to the index being a price-weighted index rather than by market cap.  The DJIA is now flat rather than down close to 100 points and IBM shares went from being down to up 0.65 at $140.70 on active volume.

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JON C. OGG

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