Gadget retailer Best Buy (NYSE: BBY) has seen its U.S. same-store sales decline over the trailing 12 months, but the company is trying to turn investor sentiment in its favor and has announced plans to buy back a whopping $5 billion of its common stock. To curry even greater love, it has also raised its quarterly dividend by 7%, to $0.16.

The buyback
With the new repurchase program comes an end to its previous $5.5 billion initiative begun in 2007, of which only $800 million was left unspent.

Best Buy isn't the only retailer of late to buy back shares after consecutive periods of lackluster performance. The world's largest retailer, Wal-Mart (NYSE: WMT), recently announced a $15 billion buyback, after several quarters of disappointing U.S. sales numbed investors' sentiments.

Best Buy's 10.3 P/E looks relatively undervalued next to those of its strongest peers in the electronics-retailing business. (Nasdaq: AMZN) has a whopping P/E of 91.0 (albeit with astounding growth), whereas Wal-Martsports a more earthly 11.7.

In Best Buy's case, though, it seems that the low value is somewhat justified. Its trailing free cash flow has shrunken and now stands at $1.55 billion for the past four quarters, compared with $1.84 billion in the year-ago period.

Best Buy's share price has fallen by more than 7% year to date, and the company has seen its same-store sales decline year over year. Meanwhile, online retailers such as Amazon and have zeroed in, stymieing Best Buy's attempt to boost market share. Higher prices have proved to be a dampener as well. To address those challenges, the company aims to double the $2 billion in sales at its online business in the next three to five years.

The Foolish bottom line
As far as envisioning a brighter future for this business, I'm not sure I see it. Yes, the dividend and the buybacks are nice. But, ultimately, it's about driving customers into stores and sending them home with big, high-margin purchases. And that's just what I don't see Best Buy doing on a greater scale in the future.

The buyback should come as good news to investors, who can maximize their immediate returns. In the short term, there might be some good news to look forward to here. However, looking farther ahead, I'd be skeptical about making this a cornerstone of my portfolio.         

Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Wal-Mart and Best Buy. Motley Fool newsletter services have recommended buying shares of Best Buy,, and Wal-Mart and creating a diagonal call position in Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.