Computershare Completes $750m Buy-Back, Shifts Focus to Dividends
Computershare has wrapped up its $750 million on-market share buy-back, cancelling over 25 million shares and signaling a strategic pivot towards dividends as the preferred shareholder reward.
- Completed $750 million on-market share buy-back
- Cancelled 25.3 million shares, reducing total shares on issue
- Average buy-back price of $29.59 per share
- Future buy-backs unlikely due to franking debit tax inefficiencies
- Dividend payments to be primary shareholder return method with 40-60% payout ratio
Completion of Buy-Back Program
Computershare Limited (ASX, CPU) has officially completed its on-market share buy-back program, which began in October 2023. Over the course of the program, the company repurchased and subsequently cancelled 25,342,266 shares, investing a total of AUD 750 million. The shares were acquired at prices ranging from $22.88 to $41.82, with an average price of $29.59 per share. This move has reduced the total number of shares on issue to 578,387,070.
Strategic Capital Management
The buy-back was a key component of Computershare’s broader capital management strategy, which seeks to balance capital deployment across mergers and acquisitions, technology investments, and shareholder returns, all while maintaining a robust balance sheet. By reducing the number of shares outstanding, the company aims to enhance shareholder value and improve earnings per share metrics.
Shift Away from Future Buy-Backs
Looking ahead, Computershare has indicated that future share buy-back programs are unlikely. The company highlighted that any new buy-backs would likely trigger a franking debit tax of 30% on the gross value of shares acquired, making this an inefficient method of rewarding shareholders. This tax inefficiency stems from the company’s minimal contributed equity and limited franking credits, a consequence of prior buy-backs and the fact that most of its earnings are generated outside Australia.
Dividends as Preferred Shareholder Reward
Instead, Computershare plans to prioritize dividend payments as the primary means of returning capital to shareholders. The company maintains a sustainable dividend payout policy, targeting a distribution of 40-60% of Management’s net profit after tax. However, dividends are expected to be largely unfranked, reflecting the limited availability of franking credits.
Looking Forward
Investors will be watching closely to see how Computershare balances its capital allocation between growth initiatives and shareholder returns in the coming years. The completion of this significant buy-back program marks a turning point in the company’s capital management approach, with dividends set to take center stage as the preferred method of rewarding shareholders.
Bottom Line?
With buy-backs off the table, Computershare’s dividend strategy will be key to sustaining shareholder value.
Questions in the middle?
- How will Computershare’s dividend policy impact its share price and investor sentiment?
- What scale of M&A or technology investments can shareholders expect given the capital allocation shift?
- Could changes in tax policy alter the company’s stance on future buy-back programs?
