Blood and plasma giant CSL Limited (ASX: CSL) has launched what will be its biggest share buyback program in the company's history. The shares rose 0.9% to $90.09 shortly after the announcement was made.
So What: Australia's biggest pharmaceutical company by market value mightn't be the typical go-to stock for dividend-hungry investors, but what it lacks in shareholder distributions it certainly makes up for in other capital management initiatives.
Speaking at its annual general meeting on Thursday, the company's Chairman, John Shine, announced what will be the company's ninth share buyback program in 10 years.
Indeed, it repurchased 10.59 million shares between October 2014 and June 2015, spending $950 million, and said that buyback, when combined with its previous ones, had contributed to a 22.7% boost to earnings per share.
Now, it is willing to spend another $1 billion on its own shares over the next 12 months, indicating that it still sees value in its shares at their current price.
This will take millions more issued shares off the market, thus spreading the company's earnings over a thinner amount of shares (resulting in faster EPS growth than profit growth).
The company also confirmed that it expects to lift 2016 financial year net profit by around 5% on a constant currency basis, although this forecast excludes the impact of the Novartis flu business acquisition from July 2015.
Now What: CSL Limited is a high-quality company which I believe offers investors compelling value today. While the shares are currently sitting well below their recent high of $102.43, investors should also consider the defensive nature of CSL's earnings stream and the strength of its balance sheet. Although I don't expect it to double in price anytime soon, it could still be a decent purchase today.
