A Toll Brothers construction site in California. Toll Brothers is one of several companies that have consistently bought back their own stock. Photographer: David Paul Morris/Bloomberg
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July set a record for companies buying back their own shares. They did it to the tune of $166 billion.
Are the companies whose stocks you own buying back their own shares? It’s worth checking.
Buybacks aren’t a magic panacea for raising shareholder value, but they often help. When there are fewer shares outstanding, each share is (mathematically, assuming other things stay equal) worth more.
In May, I wrote about five companies that have consistently bought back their own shares. They were Academy Sports and Outdoors Inc. (ASO), Employers Holdings Inc. (EIG), MetLife Inc. (MET), PulteGroup Inc. (PHM) and Williams-Sonoma Inc.
From May 26 through August 14, these stocks are up an average of just over 17%. The overall market, as gauged by the Standard & Poor’s 500 Total Return Index, is up a little less than 12%.
Caveats: My column results are hypothetical and shouldn’t be confused with results I obtain for clients. Past performance doesn’t predict the future. And figures for a period of less than three months don’t mean much to me.
Still, so far so good. I continue to like all five of the stocks I recommended in May. Here are a few more to consider. Each of them has bought back an annual average of at least 4% of its stock in the past five years, three years, and latest year.
Cigna Group
In size, Cigna Corp. (CI) ranks only about eighth among U.S. health-insurance companies. But it has been a standout in the buyback area, having bought back an average of 6.1% of its shares per year over the past five years.
It also pays a modest dividend (1.9% yield), and has been increasing the dividend rapidly in recent years. The stock has been a so-so performer. But if analysts are right about 2026 earnings, the stock should perk up: It sells for less than 10 times estimated earnings.
Textron
A conglomerate based in Providence, Rhode Island, Textron Inc. (TXT) is best known as the parent of Bell Helicopter. It makes helicopters for both military and civilian use. It also makes drones, which are becoming increasingly important in warfare.
Textron’s earnings were flat in the past four quarters, but have increased at a 15% annual clip in the past five years. Despite chronic budget deficits, I think the U.S. has little choice but to increase military spending. Analysts expect brisk growth in the next two years.
Toll Brothers
I like several of the homebuilders. I believe that many people thirst for a single-family house and can’t afford one. Mortgage rates have come down a peg recently, and if that trend continues, it would be delightful for the homebuilding industry.
Pulte, which I mentioned in May, sells homes at a variety of price points. Toll Brothers Inc. (TOL), based in Washington, Pennsylvania, concentrates on the high end. Its average selling price is getting close to $1 million (the last figure I’ve seen was $977,000).
Almost no one will buy a Toll Brothers house as their first home. But if the housing market unfreezes, move-up buyers should swell Toll’s revenue.
Synchrony
A leading issuer of private-label credit cards (for Amazon, Sam’s Club and Walgreens, among others), Synchrony Financial has seen its stock almost triple in the past five years. Even so, the stock sells for less than nine times earnings.
In the past five years, Synchrony’s buy-backs have averaged better than 9% of outstanding shares. There are several things I like about this stock and one thing I fear: a recession. President Trump sincerely loves tariffs, but I call them “economic arsenic.”
Assuming the tariffs don’t spark a recession, I think Synchrony is a good bet.
Steel Dynamics
Steel Dynamics Inc. (STLD) is the third-largest steel company in the U.S., close on the heels of number-two Cleveland-Cliffs. It was founded in 1993 by three executives who formerly worked for industry leader Nucor. Like Nucor, it emphasizes production of steel from scrap metal.
Profitability has been surprisingly good for a steel company. Steel Dynamics has shown a profit in 26 of the past 29 years. The company has bought back an average of 7.4% of its stock per year over the past five years.
When a company buys its own stock, it is often, but not always, a sign that management thinks the stock is undervalued. Think of it as one tile in the mosaic of your own buy decision.
Disclosure: One or more of my firm’s clients own MetLife, PulteGroup, Textron and Toll Brothers. I own none of them personally. Buyback ratios cited in this article came from Gurufocus.com.
