Synopsys Inc. ( SNPS Quick Quote SNPS - Free Report) recently announced that it will buy back $200 million worth of its common stocks under an accelerated share repurchase (“ASR”) program. This initiative not only reflects the California-based company’s sound financial position but also its sustained focus on enhancing shareholders’ wealth.
Synopsys entered into an agreement with HSBC Bank USA, National Association. Per the agreement, the company will initially receive approximately 443,000 shares while the remaining shares will be received on or before Feb 14, 2022, depending on the completion of purchase.
The number of shares to be repurchased, during the stated period, will be calculated on the basis of Synopsys’ daily volume weighted average share price after adjusting for a discount.
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. Hence, 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, it generated cash flow of $1.49 billion from operating activities
Apart from strategic investments, a continued focus on shareholder-friendly initiatives should boost the company’s shares. SNPS rallied 36.2% in the past year, outperforming the Zacks
Computer – Software sector’s increase of 25.3%. Image 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 payouts are
Apple ( AAPL Quick Quote AAPL - Free Report) , Cisco ( CSCO Quick Quote CSCO - Free Report) and Microsoft ( MSFT Quick Quote 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, each carry a Zacks Rank #3. The long-term estimated earnings growth for AAPL, MSFT and CSCO is pegged at 12.5%, 12% and 6.5%, respectively.