The leading producer and distributor of premium alcoholic beverages in the world, Brown-Forman Corp. (BF.B - Analyst Report) , recently declared its board of directors’ approval of a new share repurchase program. The latest buyback scheme reflects the company’s sound financial position and favorable prospects.
The new open-ended share repurchase authorization permits Brown-Forman to buy back a maximum of $250 million of its Class A and Class B shares. Under the authorization, the company can repurchase its shares in cash starting from Oct 1, 2013 through Sep 30, 2014 either from the open market, block transactions or through privately negotiated transactions.
As per the company, this share buyback program may be modified, suspended, terminated or extended at any time without any prior notice. Earlier, the company had purchased $250 million worth of its common stock in 2011 between Mar 25 and Nov 30.
The company has a consistent track record of returning cash to its shareholders through share repurchase and dividend payouts. During fiscal 2013, Brown-Forman returned approximately $1.1 billion to shareholders in the form of quarterly dividends and a $4.00 special cash dividend.
Brown-Forman has regularly paid quarterly cash dividends for the past 67 years and has been increasing it for the last 29 years. The company’s strategy of paying regular dividend and increasing the same reflects its commitment to enhance long-term value for shareholders. It also depicts the company’s ability to boost earnings as well as cash flows in the long run.
Brown-Forman’s strong balance sheet and cash flow provide financial flexibility in shareholder-friendly moves, product innovation and expanding operations in the emerging markets. The company generated operating cash flow of $537 million during fiscal 2013, while it ended with cash and cash equivalents of $204 million.
Other companies that recently announced new share repurchase authorizations include Dollar Tree, Inc. (DLTR - Analyst Report) , The Walt Disney Company (DIS - Analyst Report) , and PartnerRe Ltd. .
We believe that dividend payments and share repurchases not only enhance shareholders’ return, but raise the market value of the stock as well. Through dividend payouts, companies bolster investors’ confidence, persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Brown-Forman remains confident of its growth potential, thereby raising hopes for further enhancement of shareholder value through dividend payouts and share buybacks.
Currently, Brown-Forman carries Zacks Rank #4 (Sell).