Disney Q2 Earnings report

[mustinjourney]

While I also concluded that the main reason fort the stock buy back is to keep the Per Share values at acceptable levels, could they also be trying to prevent any possible take over by keeping the ownership "close to home" so to speak? It seems like the more stock floating around on the market, the more tempting it is for another company to start buying it up.

Apple is about the only company that has enough cash to buy them out. There aren't too many companies that have $200+ billion in cash lying around.

 

[lockedoutlogic]

While I also concluded that the main reason fort the stock buy back is to keep the Per Share values at acceptable levels, could they also be trying to prevent any possible take over by keeping the ownership "close to home" so to speak? It seems like the more stock floating around on the market, the more tempting it is for another company to start buying it up.

I don't think the level of buybacks they are talking about would be effective against that...this is more just to throw some dirt on the espn problem.

 

[jknezek]

There are two good reasons to do buy backs and one bad one. 1) to boost your stock price. The larger the market cap, the less effective this is as a long term solution. Disney's market cap is simply too high to be effective. 2) because you can't invest in something that will create a larger profit margin than your stock is expected to experience over the same amount of time. 3) to put on a show for investors in the hope they buy into your b.s. and will buoy your stock. 1 really doesn't apply. 3 is a bad, though often done, reason. 2 is the most likely reason for Disney's buybacks. With their recent stock appreciation, and dividend, it would be hard to put the cash to work in a way that would make more money than simply projecting forward from the recent past performance of the stock price. The problem, of course, is past performance is no guarantee of future performance. But investing their cash piles in resorts, parks, acquisitions, simply won't earn what the stock has earned lately, so it makes sense to continue investing cash this way to the stock holders. Eventually this will change and they will need to invest the cash more into operations because the stock won't continue to outperform the company's actual assets.

 

[Josh Hendy]

Once upon a time companies paid dividends with their profits

Possibly, stock-buybacks are preferred nowadays because management doesn't want the shareholders to get used to or expect regular dividends. And there are probably lower tax rates for receiving company profits in the form of stock price boosted by buybacks (capital gains) compared to receiving dividends (income)