The stock price has barely budged this year, and repurchasing shares would signal that Mayer has confidence in Yahoo’s growth prospects. Buybacks suggest that management believes the stock is undervalued. A dividend, on the other hand, may suggest that the company feels it has to make an effort to hold on to its investors. Also, long-term investors tend to favor a repurchase because it adds value to shares without triggering a tax bill.
Yahoo! remains one of the few large tech companies that does not offer a dividend. Apple Inc. (NASDAQ: AAPL) said earlier this year that it would pay its first dividend in 17 years, in addition to a $10 billion stock buyback. In August, competitor AOL Inc. (NYSE: AOL) announced a special dividend and a $600 million repurchase program.
Yahoo!’s first share repurchase was announced in 2001 was for $500 million. The company has since had with three more buybacks, each at $3 billion. The most recent was in 2010. The previous three programs lifted the share price by an average of 13% three months after they were announced and by 19% after six months.
Mayer and the board of directors are currently deciding how to distribute the remaining proceeds from the Alibaba transaction, according to a spokesperson.
The stock is inactive in premarket trading but closed Friday at $16.09 in a 52-week range of $14.35 to $16.79.