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Synopsys' (SNPS) Buyback Plan to Boost Shareholders' Wealth

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Continuing with its efforts to enhance shareholder value, Synopsys (SNPS - Free Report) recently announced that its board of directors approved a new share repurchase program to buy back up to $1 billion of its common stock.

The stock-buyback program at Synopsys has been in effect since 2002 and the allotted capital has been refilled depending on fund availability. However, SNPS is not obligated to buy back any specific number of shares and the program might be terminated depending on the company’s decision.

Synopsys completed its share-repurchase authorization through accelerated share repurchase arrangements. During fiscal 2021, the company purchased $753 million of its common stock. Since 2015, it has bought back approximately $3 billion of stocks.

Share repurchasing actions are a prudent way of maximizing shareholders’ wealth and generating more value. Synopsys’s latest stock buyback program indicates its commitment toward delivering a long-term shareholder value and reflects its confidence in the financial position and ability to generate sufficient cash flows.

Speaking of Synopsys’ financial position, the company ended fiscal 2021 with cash and cash equivalents of $1.58 billion. Also, the company generated cash flow of $1.49 billion from operating activities.

Apart from strategic investments, a continued focus on the shareholder-friendly initiatives should boost the company’s shares. SNPS rallied 39.8% in the past year, outperforming the Zacks Computer – Software sector’s increase of 26%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Currently, Synopsys carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Companies that have a consistent record of returning value through share repurchases and dividend payments are Apple (AAPL - Free Report) , Cisco (CSCO - Free Report) and Microsoft (MSFT - Free Report) .

In fiscal 2021, Apple returned approximately $100.5 billion through dividend payouts ($14.5 billion) and share repurchases ($86 billion). Cisco bought back $2.9 billion of its common stock and paid $6.2 billion in dividends in fiscal 2021. Microsoft paid $16.5 billion in dividends and repurchased its common stock worth $27.4 billion in fiscal 2021.

Dividend and share repurchase initiatives likely raise the market value of the stock and enhance shareholder returns. Thus, companies boost investors’ confidence through share repurchases and dividend payouts, persuading them to either buy or hold the scrip.

Apple, Microsoft and Cisco, all carry a Zacks Rank #3. The long-term estimated earnings growth for Synopsys, AAPL, MSFT and CSCO is pegged at 14.9%, 12.5%, 12% and 6.5%, respectively.

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