3 Stocks Whose Buybacks Are Paying Off
06/22/2011 10:30 am EST
One of the best signs of strength in a weak market is to buy back your stock...plus, it makes shareholders feel good, too, observes David Fried of the The Premium Buyback Letter.
Dillard’s (DDS) is one of the nation’s largest fashion, cosmetics, and home furnishing department-store chains. The 294 Dillard’s locations and 14 clearance centers span 29 states, and offer a broad selection of merchandise, including products sourced and marketed under Dillard’s exclusive brand name.
Companies in the department-store sector may have taken hard hits during the recession, but signs show that some companies in the sector could be rebounding in 2011. Dillard’s recently reported record first-quarter 2011 earnings of $1.27 per share, far outpacing the expected 91 cents per share.
Profit went up 57% in the first quarter, said to be aided by better inventory management focusing on more conservative purchasing, which led to fewer markdowns and a lowering of overall expenses. In May, same-store sales (sales at stores open at least a year) were up 2%.
Also in May, the Little Rock, Arkansas-based company announced a share buyback of $250 million, and ordered a 25% hike in the dividend. In the last 12 months, management has reduced shares outstanding by a whopping 18.8%.
This Is No Dinosaur
Fossil (FOSL) designs, develops, markets, and distributes fashion accessories, including an extensive line of men’s and women’s fashion watches and jewelry (sold under proprietary and licensed brands), as well as handbags, small leather goods, belts, sunglasses, and apparel.
The company was founded in 1984 and has a market cap of $6.5 billion. Although it might seem that wristwatches are virtual dinosaurs, an unexpected fashion wave has revived them.
Fossil licenses and markets a number of watch brands, including Armani, Michael Kors, DKNY, Burberry, and Adidas.
Fossil sells all these brands through a variety of channels, from department stores like Nordstrom and Neiman Marcus to discounters like Walmart and Target. It also sells through specialty watch, jewelry, and retail stores, and it operates 364 company-owned retail stores.
It recently hit its highest price in 12 months ($105), and analysts are looking for it to go higher. The company reported strong first-quarter results that included a 30% earnings surprise. Revenue for the period was up 37% from last year, to $537 million.
The good quarter was led by an impressive showing in watch sales, jumping 44% from last year to $113 million. Fossil also showcased strong geographic diversity, with both North American and Europe wholesale shipments up 34% from last year.
Management has reduced its shares outstanding by 6.1% in the last 12 months.
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Signs Point to a Clean Bill of Health
Aetna Inc. (AET) is one of the nation's leading diversified health-care benefits companies, serving more than 33 million people. Aetna offers a broad range of traditional and consumer-directed health insurance products and related services.
The company had 17.8 million people enrolled in health-insurance plans at the end of the first quarter.
This month, Aetna announced it was buying Genworth Financial’s Continental Life Insurance for about $290 million. Continental Life's business includes Medicare supplement insurance, accident and health coverage, and some coverage for funeral services and other financial expenses.
This is a growth opportunity for Aetna, which has about 10,000 Medicare supplement customers; it will add roughly 145,000 members with the deal. Aetna said Medicare supplement coverage is expected to grow fast in the coming years, as baby boomers reach age 65 and become eligible for Medicare.
Aetna has been a robust repurchaser for many years, with the most recent announcement in May of plans to buy back another $750 million. In the last 12 months, management has reduced shares outstanding by 10.7%.