Shares of Qurate Retail (QRTEA 18.23%) were climbing Friday after the parent of QVC, HSN, and Zulily declared a special dividend and authorized a new share buyback program.
Not surprisingly, that news delighted investors, who see the company as a unique combination of growth and value in e-commerce. The stock was trading up by 13.1% as of 1:22 p.m. EST.
Qurate announced Friday morning that the board of directors had authorized a $1.50 special dividend, payable on Dec. 7 to Series A and Series B shareholders of record at the close of Nov. 30. The yield on that payout alone is 15% even after today's jump, which explains the stock's surge. A lot of traders may be buying shares just to get their hands on that juicy one-time payout.
In addition, the company said it would commence a share buyback program with a repurchase authorization of $497 million. Based on its current market cap, that would be enough for the company to repurchase about 12% of its shares outstanding.
CEO Greg Maffei said, "We are pleased to announce further actions that deliver free cash flow to our shareholders: a one-time cash dividend and the commencement of repurchases of our shares. We have continued confidence in the strength of the business and believe this is an efficient return of capital while maintaining our stated leverage target."
The special dividend and buyback announcements show that Qurate management believes its stock is undervalued. Shares trade at a price-to-earnings ratio of less than 5, and the company believes it has a promising growth opportunity in live-streaming, which some industry observers believe could be the next growth channel in e-commerce.
While Qurate's legacy businesses are slow-growth enterprises, this is the company's second special dividend in just three months. If this becomes a pattern, the stock price should keep climbing.