Big business shows the love
As bad as the economy seems, many companies have lots of cash...and they are starting to share it with their shareholders.
NEW YORK (CNNMoney.com) -- This Valentine's Day, Corporate America is sending investors something better than a bouquet of roses and chocolates. Cash.
Comcast (CMCSA), despite having a rough year in 2007, announced Thursday morning that it planned to buy back $7 billion in stock by the end of next year and also said it would start paying a dividend.
This is undeniably a good sign for the market, which is slowly starting to recover after a disastrous January.
Buybacks lower the number of shares outstanding, which, in turn, boost earnings per share - and that can help the stock price. A buyback can also be taken as a sign that management thinks the stock is undervalued.
Dividends are a plus because they offer investors steady income payments. And they also signal that the company feels its business is strong enough to support regular payments. In addition, many investors reinvest dividends, further supporting the stock.
Comcast said it will pay an annual dividend of 25 cents per share, which works out to a yield of 1.4%. The average yield for the S&P 500 is 2%.
Amazon.com (AMZN, Fortune 500) announced last week that it intended to repurchase $1 billion in stock over the next two years. Verizon (VZ, Fortune 500) replaced a previous repurchase plan with a new one that authorizes a buyback of up to 100 million shares.
And hard drive maker Seagate (STX) announced earlier this month that it approved a buyback plan of up to $2.5 billion in stock and also raised its quarterly dividend 20%. The company's dividend yield is now 2.1%, impressive for a tech company.
What this all shows is that outside the financial sector, companies in many other industries, such as tech, manufacturing, consumer discretionary and telecom, are not facing cash crunches.
Even some select financial stocks are bucking the trend among banks to slash their dividends. Last week, Atlanta-based SunTrust (STI, Fortune 500), which has seen its profits plunge due to credit-related losses, actually raised its dividend by 5%.
Of course, SunTrust is probably the exception and not the rule among banks.
Dividends and repurchases may not be as sexy a Valentine's Day gift as jewelry or lingerie. But if you ask me, the actions of Comcast, 3M and others as of late are the equivalent of a Cupid's arrow straight to the heart of Wall Street.