In his latest article for Morningstar.com, Validea CEO John Reese says companies are ramping up their share repurchasing plans this year, which could yield shareholders some nice rewards.
Reese says that U.S. nonfinancial firms have record levels of cash on their balance sheets, having done some extreme belt-tightening during the Great Recession. “Companies won’t sit on that cash forever, especially not with money market funds yielding so little,” he says. “Many have already started putting it to use, and one way they’re doing so is by buying back their own shares — a practice that had become extremely unpopular in 2008 and 2009.” So far in 2010, U.S. companies have announced more than $150 billion, compared to $20 billion in the same period a year ago, according to Dealogic, Reese notes.
Reese sees plenty of cash available to go toward both dividend payouts and share repurchases. And he touches on some impending tax law changes that may make companies particularly interested in buying back their own shares. To read Reese’s full article, which includes a few firms that have been buying back shares that also get approval from his Guru Strategy computer models, click here.