Brown-Forman Corp. (BF.B), one of the world’s leading producers and distributors of premium alcoholic beverages, recently declared that its board of directors has approved a new share repurchase program. The latest buyback scheme reflects the company’s sound financial position and favorable prospects.
The new open-ended authorization permits Brown-Forman to buy back a maximum of $250 million worth of its Class A and Class B shares in cash starting from Oct 15, 2014 through Oct 14, 2015, either from the open market, block transactions or through privately negotiated transactions.
As per the company, this share buyback program can be modified, suspended, terminated or extended at any time without any prior notice. Earlier, the company had purchased $250 million worth of its common stock between Oct 1, 2013 and Sep 30, 2014.
The company has a consistent track record of returning cash to its shareholders through share repurchase and dividend payouts and has regularly paid quarterly cash dividends for the past 68 years, while increasing the same for the last 30 years. During fiscal 2014, Brown-Forman returned approximately $233 million to shareholders in the form of quarterly dividends. This strategy reflects the company’s commitment toward enhancing long-term value for shareholders and also depicts its ability to boost earnings as well as cash flows in the long run.
Brfown-Forman’s strong balance sheet and cash flow provide it with the financial flexibility to make shareholder-friendly moves as well as scope for product innovation and expansion of operations in the emerging markets. The company generated operating cash flow of $649 million during fiscal 2014, while ending it with cash and cash equivalents o $437 million.
Other companies that recently announced new share repurchase authorizations include Avis Budget Group, Inc. (CAR), Investment Technology Group Inc. (ITG) and Vanguard Natural Resources, LLC (VNR).
We believe that dividend payments and share repurchases not only enhance shareholder return but raise the market value of the stock as well. Through dividend payouts, companies bolster investor confidence, persuading them to either buy or hold the scrip instead of selling it. Looking ahead, Brown-Forman remains confident of its growth potential, thereby raising hopes for further enhancement of shareholder value.
Currently, Brown-Forman carries Zacks Rank #3 (Hold).
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