We have already called Best Buy Co., Inc. (NYSE: BBY) a great value stock before and after its last earnings report last week. Despite a choppy market, its shares have been rallying. Now this morning comes yet one more word on how and why that “Value” is so evident.
Best Buy has raised its dividend and started a large share buyback plan. Reports have been out that Bill Ackman has been building a position and it is as if the home appliances and electronics retail outfit is instinctively taking on its own form of investor activism.
The buyback plan from its board of directors is a new $5 billion share repurchase program, which replaces and terminates the prior $5.5 billion shares buyback plan of $5.5 billion. That prior plan was from June 2007 and had approximately $800 million of remaining authorization. In short, Best Buy has spent some $4.7 billion buying back stock already and has made a commitment to buy back up to $5 billion more.
Best Buy also juiced up its dividends with a 7% increase in the quarterly cash dividend to $0.16. Based upon the $31.54 share price, that generates a yield of 2.03%. Shares are actually trading up over 3% this morning around $32.50 so that new yield will be lower for those who buy today based upon the confirmed value thesis.
JON C. OGG
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