A dividend payment is only one way to distribute
money back to shareholders. A second way is to buy own shares back. Some
companies repurchase their shares instead of the dividend payment and they try
to boost earnings per share growth with this model. It’s a very tax-optimized
method, especially if you use debt for this process as happened with Apple.
I also look at the number of shares repurchases when
I consider buying a stock. The total amount of cash distribution is critical
and not the amount of dividend payments in the past. Some companies gave back
money in the amount of their whole company over the recent five years and they
try to follow this approach for the future. That’s what I really like.
Out there is a great index that covers some of the
best dividend growth stocks with share repurchases and adds the best share buyback
companies. Within the recent 12 months, all constituents needed to buy at least
five percent of their own outstanding shares.
Today I like to screen the Share Buyback
Achievers Index by the cheapest dividend stocks with additional growth
potential. I selected stocks with a low forward P/E (under 15) as well as a P/B
and P/S ratio of less than one. In addition, the five year earnings per share
should grow at least with five percent or more.
Fifteen stocks
fulfilled the above mentioned criteria. Half of the results pay a dividend between
1 percent and 2.5 percent. The rest is only focused on share buybacks. The good
thing is that nine companies have a current buy or better rating.
