Plenty of All Ordinaries Index (ASX: XAO) companies are partial to an on-market buyback of their own shares. By snapping up their own stock, they're returning excess capital to shareholders.
It's a method favoured by billionaire investing great Warren Buffett. He heads diversified holding company Berkshire Hathaway, which has bought back billions of dollars worth of its own stock in recent years
Commenting on the often-misunderstood capital return method in Berkshire Hathaway's latest letter to shareholders, Buffett wrote:
The math isn't complicated: When the share count goes down, your interest in our many businesses goes up.
In fact, the move appears to be the company's preferred method of providing returns, as it doesn't pay dividends to investors.
So, which ASX All Ord companies have been hungry to buy their own shares in recent years? Let's take a look.
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3 ASX All Ords shares chowing down on buybacks
The coal share snapping up its own stock hand over fist
Whitehaven Coal Ltd (ASX: WHC) has undergone one of the biggest All Ords share buybacks, by percentage of outstanding shares targeted, in recent months.
The company forked out $550 million to buy 10% of its own stock between March 2022 and October 2022. But that wasn't enough to sate its appetite.
It then extended its buyback program, aiming to secure another 25% of its stock over a 12-month period.
Interestingly, the buyback might have been a more attractive method to return cash to the company's investors than a bolstered dividend. It may have all come down to tax.
Franking credits often attached to dividends can make cash payouts attractive on a taxation basis. However, as Whitehaven Coal hadn't turned a meaningful profit for some time prior to financial year 2022, it held no franking credits to offer shareholders until late last year.
This All Ords share has a rich history of buybacks
Another All Ords share with an interesting dividends-versus-buyback proposition is Qantas Airways Limited (ASX: QAN). The airline hasn't posted a dividend since 2019 but that hasn't stopped it from returning capital to investors.
It underwent a $400 million buyback last year before announcing another one – worth $500 million – in February.
The airline is a long-term fan of buybacks. It bought back around 30% of its stock between 2015 and 2019 – the most of any All Ords share, before undergoing a $443 million off-market buyback in late 2019.
The stock setting aside $1.5b for on-market capital returns
Finally, All Ords constituent Aristocrat Leisure Limited (ASX: ALL) has also doubled down on buying back its own shares recently.
The gaming technology company announced a $500 million on-market buyback this time last year.
It made the decision on the back of its "exceptionally robust balance sheet and consistently strong cash flow generation", CEO Trevor Croker said.
That was extended by another $500 million in February and once again earlier this week. The All Ords company now has a total of $1.5 billion set aside to snap up its own shares.
