Is Las Vegas Sands' Buyback Program Better Than a Dividend Increase?

In the following video, Fool contributor Matt Thalman discusses why he thinks Las Vegas Sands' recent announcement to initiate a $2 billion share-buyback program was a better decision than increasing the company's current yearly dividend payment of $1.40 per share.

At today's current share price of around $56 per share, with $2 billion the company could buy back around 35 million shares, or 8.8% of the 401 million shares currently in float. But that same $2 billion would increase the dividend by roughly only $0.41 per share, and since the buyback program is over a number of years, if we split the dividend by four, shareholders would get only about an extra $0.10 per share per year, or $0.025 per quarter.

While Matt does agree that the buyback was the better way to go, he says he'd like to see the company do something with the shares it repurchases. Watch the video to find out what that is.

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  • Report this Comment On June 15, 2013, at 11:47 AM, JF125780 wrote:

    Matt,You bring out some interesting points, but as a shareholder I wonder just how many years and if they will buy back 2 billion dollars as they stated up to $2 billion dollars.

    Danny Kowkabany

  • Report this Comment On June 15, 2013, at 1:00 PM, XMFMT wrote:

    Hey JF125780 thanks for the comment.

    Typically when a company states a certain dollar figure, they use that full amount. But, one time I would rather that not happen, is if the stock price starts jumping higher and begins to stretch the fundamentals too far. Then I would prefer the company not use the full amount stated in the buy-back program. And with the number of years, well again we don’t truly know but if I had to guess, it would be over the next 3-5 years. I used 4 years in the comments prior to the video just to make the number easy to understand.

  • Report this Comment On June 17, 2013, at 4:01 PM, dswallen wrote:

    I like a good buyback program as much as the next guy, but I'd much prefer the dividends. With the buybacks, sure it's nice to reduce the float by 8.8%, it makes hitting the earnings targets on the bottom line close to 9% easier.

    But share buyback programs are only effective so long as the company does not turn around and grant stock options to executives. The majority of firms grant such stock options if the executives meet specific targets (normally around the stock price). In the end, it turns into an exercise of taking money away from the common stock holder (dividends) and giving it to the one percenters (executives in stock options).

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