Stock buybacks slow as market grinds lower and credit tightens - South Florida Business Journal:

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Buybacks are down 65 percentf nationwide this year and as much as 90 percent down in saidMike Burnick, director of research and clientt communications at Palm Beach Gardens-based . “Buybackas used to be seen as the ultimate vote of confidencreby directors,” he noted. The traditional view is that buybacksz can be a genuine boost to currentt stockholder value and a signal to the marketr that the sharesare undervalued. But, they don’ty always deliver as hoped. ( : AN) did two plannedd stock buybacks during the last five withdisappointing results.
It borrowed heavilh to fund the buybacks, which are now worth aboutr 75 percent less than it paidfor “I know why companiea say they do stock buybacks,” investment banker Craig Farlie “They feel their shares are undervaluee in the market, but I’m not sure it’w ever a good idea.” Farlie, who with partnedr Michael Turner, runs Fort Lauderdale-based Farlie Turnerf & Co., shepherds company acquisitions for clients in the $50 milliom to $200 million range. “When they use financial resourceds tobuyback shares, how much do they reall believe in their core business plan?” he asked.
Locall companies with stock buyback programinclude AutoNation, , , , , , , , and Worled Fuel Services. “Stock buybacks are a guns or buttee argument,” said attorney Nick an associate in the Corporate Department of in WestPalm Beach. “Is it being done for the righft reasons and is it the best use ofthe cash? Or would investment in researchu and development or an acquisition be a betterd investment?” For a textbook example of a successfukl stock buyback program, look no furtherd than Coconut Grove-based Watsco (NYSE: which claims to be the nation’s largest heating, ventilating and air conditioninfg systems distributor, with $1.
8 billion in revenue last “The stock buyback program is our third orded of priority for our cash flow aftedr company acquisitions and dividend enhancement,” Watsck Senior VP Barry S. Logan said. The Watscio buybacks started in 1999 andaveragesd $17.69 a share for the 6.4 million shares acquired over the last nine years, accordingf to Logan. Shares are currently sellintg in thelow $30s. Watsco’s dividend has increased from 10 centato $1.80 a shar e – an annual growth rate of 43 percent and the stock currently yields clos e to a 6 percent return.
Attorney Martyu Schrier, a partner in the Miami officdeof K&L Gates, sees stock buybacka when done successfully as boosting companhy per-share earnings and being anti-dilutive, especially when a company issuea options on a large scale. “It tends to balance off the optionx formany companies, but any buyback must conformm to the ’s rule 10b-18, usually referres to as the safe harbort rule,” he said. Undert the safe harbor, or anti-manipulation safeguards, therre are regulations covering when a company can buy its It can’t buy at the opening or duringv the last half-hour of trading.
It is limites to no more than 25 percengt of the trading volumeand can’tr bid the stock higher. “Iyt is not a tool for manipulating thestocj price,” Schrier said, “and a prograjm can’t be started in advance of a proposed stock