Examples of Companies Changing Dividend Policies to Favor Stock
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😎 Can you find any relevant examples of companies that made a significant change in their dividend policy and shifted to favor stock buybacks? Or vice versa, companies that historically delivered dividends and shifted to stock buybacks to remunerate shareholders.
🤖 Sure, I can find some relevant examples of companies that made a significant change in their dividend policy and shifted to favor stock buybacks, or vice versa. Here are some of them:😎 Can any of those changes or similar examples be situated in the context of a change of CFO or other management?
• Apple is a company that historically paid dividends, but shifted to favor stock buybacks in recent years. Apple started paying dividends in 1987, but stopped in 1995 due to financial difficulties. It resumed paying dividends in 2012, after a decade of strong growth and profitability. However, since then, Apple has spent more on stock buybacks than on dividends, as a way to return excess cash to shareholders and boost its earnings per share. In 2020, Apple paid $14.1 billion in dividends, but repurchased $72.3 billion worth of its own shares [www.theguardian.com]
• IBM is another company that historically paid dividends, but shifted to favor stock buybacks in recent years. IBM has been paying dividends since 1916, and has increased its dividend for 25 consecutive years. However, IBM has also been buying back its own shares aggressively, as a way to offset the decline in its revenue and earnings. In 2020, IBM paid $5.8 billion in dividends, but repurchased $7.3 billion worth of its own shares [finance.yahoo.com]
• Exxon Mobil is a company that historically delivered dividends and shifted to stock buybacks to remunerate shareholders, but reversed its policy in 2020 due to the impact of the COVID-19 pandemic and the collapse of oil prices. Exxon Mobil has been paying dividends since 1882, and has increased its dividend for 37 consecutive years. It also used to buy back its own shares regularly, spending as much as $30 billion in 2008. However, in 2020, Exxon Mobil suspended its stock buyback program and kept its dividend unchanged for the first time in decades. It also reported its first annual loss since 1997 [www.spglobal.com]
• Starbucks is a company that historically delivered dividends and shifted to stock buybacks to remunerate shareholders, but resumed its dividend growth in 2021 after a temporary pause due to the COVID-19 pandemic. Starbucks started paying dividends in 2010, and has increased its dividend for 10 consecutive years. It also bought back its own shares frequently, spending as much as $12 billion in 2019. However, in 2020, Starbucks suspended its stock buyback program and kept its dividend unchanged due to the impact of the COVID-19 pandemic on its business. In 2021, Starbucks resumed its stock buyback program and raised its dividend by 10%.
I hope these examples are helpful for you. If you want to learn more about these companies and their dividend policies, you can use my web search tool to find more information. If you have any other questions or requests, please feel free to ask me. 😊 [www.theguardian.com] [finance.yahoo.com] [www.spglobal.com]
🤖 Yes, some of those changes or similar examples can be situated in the context of a change of CFO or other management. Here are some possible scenarios:
• In 2018, General Electric (GE) announced a change in its CFO, replacing Jamie Miller with Lawrence Culp Jr., who also became the CEO. The new management team decided to reduce GE’s dividend to just one cent per share, down from 12 cents per share, as part of a broader restructuring plan to improve the company’s financial performance and reduce its debt. GE also sold some of its assets and businesses, such as its biopharma unit and its stake in Baker Hughes. The dividend cut and the asset sales were seen as a sign of GE’s financial distress and its need to preserve cash [blogs.cfainstitute.org]
• In 2019, Boeing announced a change in its CEO, replacing Dennis Muilenburg with David Calhoun, amid the crisis caused by the grounding of its 737 MAX jets following two fatal crashes. The new management team decided to suspend Boeing’s dividend and its stock buyback program, which had been active since 2013, as part of a strategy to conserve cash and restore confidence in the company. Boeing also faced lawsuits, regulatory investigations, and compensation claims from airlines and customers. The dividend suspension and the buyback halt were seen as a reflection of Boeing’s uncertain future and its need to prioritize safety and quality [hbr.org]
• In 2020, Intel announced a change in its CEO, replacing Bob Swan with Pat Gelsinger, after facing delays and setbacks in its chip production and losing market share to its rivals. The new management team decided to increase Intel’s dividend by 5%, from $1.32 to $1.39 per share annually, as part of a plan to boost shareholder value and demonstrate confidence in the company’s long-term prospects. Intel also announced that it would continue to invest in its own manufacturing capabilities, as well as outsource some of its chip production to third-party foundries. The dividend increase and the investment plan were seen as a signal of Intel’s commitment to innovation and growth [www.investopedia.com]
I hope these scenarios are helpful for you. If you want to learn more about these companies and their dividend policies, you can use my web search tool to find more information. If you have any other questions or requests, please feel free to ask me. 😊 [blogs.cfainstitute.org] [hbr.org] [www.investopedia.com]
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