Wal-Mart Tries for $15 Billion More in Share Buybacks (WMT, RTH)

Wal-Mart Stores, Inc. (NYSE: WMT) is going for the headline effect this morning at its 40th Annual Meeting of Shareholders.  The company announced that its Board of Directors has just approved a new $15 billion share repurchase program.

Today’s buyback program looks massive on the surface.  It still is if you compare the new plan with the prior plan.  The earlier repurchase program,  announced a year ago, was also set at $15 billion,   The prior $15 billion buyback plan had about $4.7 billion left to it, so about $10.3 billion in stock has been purchased.

In the first quarter of fiscal 2011, the company’s $3 billion purchase represented 55.6 million shares, which the company said was a record.  Over the last 3-year period, the company has repurchased $18.5 billion worth of shares.  The current market cap is close to $193 billion.

The repurchased shares are constructively retired and returned to unissued status.

Wal-Mart will also pay out more than $4.5 billion in dividends during this fiscal year based on its annual dividend of $1.21 per share.  CNBC just reported this dividend as being raised, but the real raise of the dividend has already taken place and the company is half way through its fiscal 2011 dividend cycle.

The interesting notion about share buybacks is that this lowers the free float and is generally deemed to be an offset against new shares for sale on the market.  A year ago the stock was close to $50.00.  Today shares are down 1% on the day and the stock is at $51.22.  It looks like if you backed out all the net share buying on behalf of the company in its own stock that Wal-Mart shares would be flat or maybe even in the red in a year-over-year comparison.

If you compare this to the sector, Wal-Mart has some explaining to do.  The Retail HOLDRs (NYSE: RTH) is up about 20% from a year ago, and Wal-Mart itself accounts for roughly one-fifth of the entire ETF.

This is a classic definition of ‘range-bound trading’ for a stock.

JON C. OGG