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Synopsys (SNPS) Boosts Shareholders' Wealth With $240M ASR Deal

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Synopsys Inc. (SNPS - Free Report) recently announced that it would buy back $240 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 Bank of America, N.A. Per the agreement, the company will initially receive approximately 535,000 shares, while the remaining shares will be received on or before Nov 18, 2022, depending on the completion of the purchase.

The number of shares to be repurchased during the stated period will be calculated based on 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 ASR arrangements. In the first three quarters of fiscal 2022, the company purchased $717 million worth of its common stock. Since 2015, it has bought back more than $3 billion of stocks.

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

Speaking of Synopsys’ financial position, the company ended the third quarter of fiscal 2022 with cash and short-term investments of $1.53 billion. Also, it generated cash flow of $1.35 billion from operating activities during the first nine months of fiscal 2022.

Apart from strategic investments, a continued focus on shareholder-friendly initiatives should boost the company’s shares. Currently, Synopsys carries a Zacks Rank #2 (Buy). 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 - 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 $7.7 billion of its common stock and paid $6.2 billion in dividends in fiscal 2022. Microsoft paid $18.1 billion in dividends and repurchased its common stock worth $32.7 billion in fiscal 2022.

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 (Hold). The long-term estimated earnings growth for AAPL, MSFT and CSCO is pegged at 12.7%, 11.7% and 6.5%, respectively.

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