Nike had a big announcement last evening, sending the stock up over three and a half percent in the aftermarket. Why, what, where? The release tells you everything: Nike, inc. announces new $12 billion share repurchase program, 14 percent increase in quarterly dividend and two-for-one stock split. The current 8 billion Dollar repurchase program will finish in fiscal year 2016, that is when the next one will start. This is a pretty aggressive buyback by historic standards, the release quotes CEO Mark Parker (not related to Spiderman) as saying the company has returned 23 billion Dollars to shareholders over 14 years.
This buyback represents 50 percent of all the buybacks in the last decade and a half. And more impressive is that 12 billion is to the current market cap of 107 billion a healthy 11.2 percent. Which means that once the shares have been bought back, the company will report results on less than 90 percent of the current shares in issue, if of course they get to buy them at current prices. Whilst the dividend has been hiked to 32 cents, at the two for one split it is 16 cents, an annualised 64 cents on a share price of 65 Dollars (half of the current 130 Dollars), not even one percent yield before tax. You certainly are not owning this business for the yield, rather you are owning the business for the growth prospects. Nike stock will begin trading on the split adjusted basis on the 24th of December this year. An early Christmas present for sure!!