What happened
Oil prices are rising slightly today. While West Texas Intermediate and Brent Crude, two benchmarks, are both up more than 0.8%, bulls are downright energized about picking up shares of Teekay Corporation (TK 1.63%) thanks to the company's announcement about its investor-friendly capital allocation plans.
As of 12:07 p.m. ET, shares of the oil shipping stock are up 10.4%.
So what
In an effort to return capital to shareholders, Teekay announced that its board of directors has authorized a share repurchase program of up to $30 million. The timing of the repurchases is up to the company's discretion.
Additionally, the company reported the conclusion of a previous share repurchase program that it had announced last August, Teekay announced today that it has bought back nearly $30 million worth of the company's stock. The 6.45 million shares that the company has repurchased represent about 6.3% of the company's outstanding shares immediately before the announcement of the program last summer.
Now what
With Teekay announcing a new stock buyback program, skeptics may question whether the company is jeopardizing its financial well-being in order to satisfy investors. It seems, however, that this isn't necessarily the case. As of January, Teekay has zero debt and over $300 million in cash on its balance sheet.
Potential investors who find management's commitment to shareholders encouraging should recognize, though, that while the company is enthusiastic about buying back stock, it's less interested in paying a dividend. For those who are interested in greasing the wheels of their passive income machine with a dividend-paying stock, therefore, Teekay won't be an option.
