If you had picked up Gap (NYSE:GPS) shares over the last year for around $30.35, you'd be sitting on a nice little 6% return. With enough initial investment, you could be looking at a car down payment or maybe a new TV. If you were Gap, and you ended up over 38 million shares at that price, you'd be looking at quite a bit more. Maybe you'd finally get that pony.

Source: Gap 

Gap has spent over $1.5 billion repurchasing shares over the last twelve months, and it still has $383 million in authorized repurchasing funds. The company's aggressive repurchasing has helped cull excess shares and give more back to each existing shareholder. In 2011, Gap's average share count was 533 million -- this quarter it was 443 million. That's a 17% reduction in outstanding shares, and it has helped bump up earnings per share.

Sending cash back to investors
Gap's share repurchasing and dividend payment plan was summed up perfectly in the company's shareholder meeting last year. Sabrina Simmons, Gap's CFO, said,

"As evidence of [Gap's] commitment to return cash to shareholders, since 2004, [Gap has] utilized about $12 billion to repurchase over 600 million shares, at an average price of $20 per share. This has resulted in a 50% reduction to [the company's] share count. Over the same period, [Gap's] dividend has grown nearly sevenfold from $0.09, to an expected $0.60 per share.

Here's what this says to me. First, Gap has been buying shares at good prices. The shares' ten year range has been between about $10 during the depths of the crisis and $46 in the middle of 2013. Getting in 600 million shares over that period is money well spent.

Second, Gap is focused on cutting its outstanding shares down in order to give more to each shareholder. There are some companies that are forced in to repurchases just to keep their counts level as they issue more and more options to CEOs and other executives. Gap hasn't fallen into that trap.

Finally, Gap hasn't let its buybacks cut into its regular dividend payments. That quote was from May 2013, and in 2014 annual payments are going to hit $0.88 per share. Right now, that puts Gap at a 2.1% dividend yield, and makes it one of the more attractive dividend payers in the retail space.

Spending on repurchases
Of course, buying shares back means that Gap is spending money on those shares instead of on investing in itself. That only makes sense if the company is either already spending enough on its own development or if it thinks that the value generated by the shares will outweigh the value generated by more investment.

In its last reported quarter, Gap's net income rose by 9.6%, but thanks to share buybacks, earnings per share rose 17.2%. Gap is both growing the bottom line and managing to give more back to shareholders. The repurchasing activity hasn't hurt the company's investment in itself, and has managed to give more back to investors.

Gap's focus on returning value to shareholders has been well measured, and the retailer has managed to walk the fine line between buybacks and investing in growth. It's still a retailer in a very difficult environment -- in the first half, net income is down 7%, for instance -- and the holidays are going to be difficult as well. If things keep being tough, all that money spent on buybacks is going to start looking less and less well thought out. For now, though, Gap's big buyback seems like a great move.