3 Stocks Ringing in The New Year With Large Buyback Announcements

Key Points

• These three stocks just announced big buybacks. They are worth 7% to over 50% of their market capitalizations.
• Share buybacks offer the potential for stock price appreciation. They allow companies to return capital while enabling tax-flexibility for investors.
• Two of these firms also just announced their first-ever dividend payments.

Share buybacks are an important way that corporate management teams look to return value to their shareholders. Buying back stock decreases the number of outstanding shares a company has in the market. Because there are fewer shares, the company’s earnings per share rise, all else held equal. Markets often see buybacks as a vote of confidence in the company's direction, as they reflect an investment the company is making in itself.

Buybacks that lead to higher stock prices also provide more tax-flexible returns than dividends. Dividends paid by U.S. corporations are typically taxed at the same rates as long-term capital gains. However, investors must pay taxes on dividend income when they receive it. Investors don’t have to pay taxes on capital gains until they sell. This allows for a deferment of the tax payment.

This means that investors can keep their money invested for longer, instead of sending it to Uncle Sam. This can potentially create larger, compounded returns. Below, I’ll dive into three U.S. companies that just announced large, and in some cases massive, buyback programs. All market capitalization and return, and implied upside figures are as of the Dec. 30 close.

GE Vernova: Electrifying the World and Potentially Returns with Share Buybacks

GE Vernova NYSE: GEV, the energy and electrification equipment giant, just announced a sizable buyback authorization of $6 billion. Shares have gone on a tear since they spun out of their former parent company, General Electric. A 152% return in 2024 isn't too shabby. The buyback authorization now represents just under 7% of the company’s market capitalization.

At the same time, the company announced its first dividend payment of $0.25 per share. The company's dividend yield is just 0.3%. But it's a good sign to see it providing income to shareholders so early in its history as an independent entity. The company has been a favorite of Wall Street analysts. On average, they have been raising their price targets as news and earnings reports emerge. GE Vernova recently announced that it has signed deals to power data centers with its natural gas turbines. This is a source of investor optimism and long-term upside.

Match Group: Swipe Right on Dividends, Buybacks, and AI Potential

Match Group NASDAQ: MTCH also just announced a big buyback authorization. Its market capitalization is over double the size of GE Vernova’s. The company’s $1.5 billion buyback authorization equates to 18% of its market cap. Like GE Vernova, the company also announced the initiation of dividend payments. If annualized, the company’s $0.19 per share quarterly dividend gives it a dividend yield of 2.3%.

When it comes to returns in 2024, that is where the similarities with GE Vernova end. Shares are down 10%. At its recent Investor Day, the dating app company laid out its plan to turn things around. Unsurprisingly, it involves using AI. The company is working to implement AI to help people find more matches and turn matches into real connections. This includes implementing chatbot-like features that help users come up with better responses and transition the online conversation to an actual date. It will be interesting to see if these new features can reignite revenue growth that clocked in at under 2% last quarter.

Olin: Materials Stock With Massive Buyback Announcement and +30% Upside

Olin NYSE: OLN is a lesser-known name, but its recent share buyback authorization is anything but small. The $2 billion authorization was recently increased from $700 million. With a market capitalization of just under $3.9 billion, the authorization represents nearly 52% of the company’s value. The basic materials stock didn’t fare well in 2024, providing a total return of -38%. However, like Match Group, the company’s Investor Day laid out how it plans to get back on the right side of the market.

The company makes many products, including chlorine, epoxy, and Winchester firearm ammunition. The company isn't focused on massive revenue growth. It expects these broad markets to grow at 3% to 6% annually over the next five years. Instead, the company aims to drive $250 million in structural cost reductions by 2028. It also plans to return over 50% of its operating cash flow to shareholders through 2029. Wall Street sees significant value in this stock. The average of two December price targets from Citigroup and Barclays implies 33% upside in the shares.