You've heard of share buybacks before. Now when was the last time that you heard a company place an overnight share-repurchase order? That's what Family Dollar
Usually, buyback announcements are weighted down with self-serving rhetoric. A company issues a public statement to let the markets know that it believes its shares are undervalued while providing itself with enough wiggle room to back out of the buyback. Family Dollar isn't leaving that up to chance. Unless its shares climb too high, Bank of America will repurchase shares of the company until 6% of the outstanding stock has been acquired.
It's just one more sign that the thrifty discounters are sorely out of favor. Last week, rival Dollar General
Buckmasters Dollar Tree
These were supposed to be defensive stocks. Instead, their trading patterns have been offensive to shareholders. That's why Family Dollar and Dollar General are doing the right thing in gobbling back their unwanted stock. Wal-Mart has also spent the past few years trimming down its share count.
We can always debate the merit of buying back stock when dollars run dry. Family Dollar actually closed on a $250 million issuance of debt last week to bankroll today's repurchase. That's because it makes far more sense for cash-rich companies to buy their stock than those who have to finance their repurchases. However, Family Dollar's heart is in the right place on this one. Coming off a lackluster quarter with its stock at a five-year low, it was determined to lead by example.
Let's see whether the market will follow.
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Longtime Fool contributor Rick Munarriz can squeeze a penny when he has to. He does not own shares in any of the companies in this story. T he Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.