Why is ANZ buying back more shares?

ANZ is launching a share buyback today. But what's it for?

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ANZ Group Holdings Ltd (ASX: ANZ) shares are having a decent session.

In afternoon trade, the banking giant's shares are up 0.5% to $24.44.

What's going on with ANZ shares today?

Today's decline appears to be due to strength in the banking sector, with the majority of ASX bank shares (big four and regionals) pushing higher today.

In addition, there was an announcement today which revealed that ANZ has hired UBS to undertake a share buyback. As this buyback has started today, it's possible that this could be boosting the bank's share price.

What is this latest share buyback?

While share buybacks are always good news for shareholders, this one isn't quite the same as your usual buyback.

That's because the purpose of this buyback is to neutralise the impact of its dividend reinvestment plan (DRP).

Next month, ANZ will be paying shareholders a 94 cents per share partially franked dividend. It has also given them the option to receive these funds in the form of shares via its DRP.

But of course, if new shares are created, it dilutes those that already exist. So, in order to neutralise this effect, the bank has enlisted UBS to buyback the appropriate number of shares. After which, they will be cancelled.

According to the release, shares up to a value of approximately $212 million are expected to be purchased on market to satisfy its obligations under the DRP.

The DRP pricing period begins today and finishes on 5 December 2023. The on-market purchase of shares may occur any time during the DRP pricing period.

ANZ shares are up over 3% since the start of the year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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