Stock buybacks aren’t always the best use of a media...
Stock buybacks aren’t always the best use of a media company’s cash, especially when its shares aren’t underpriced, Sanford Bernstein analyst Todd Juenger wrote investors. The media companies he covers -- Disney, CBS, Discovery, News Corp., Time Warner and Viacom…
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-- have spent about $24 billion over the past six quarters buying their own shares, he said. “While most investors are delighted, the debate remains unsettled over whether and how this creates value for equity holders … and what are the implications in the long run.” In some cases, companies may have better uses of cash than buying back shares, such as investing in programming development or other areas of its business, he said. “Long term investors should also be mindful of where this trend leads if allowed to play out to its full conclusion,” he said. “At the current pace, in less than a decade, we will be left with many (relatively) smaller market cap media companies, with no more shares to repurchase and no new growth platforms from which to build,” he said. “Although they'll probably start paying a heck of a dividend yield.”