The digital payments giant sent a fortune back to its owners, yet the stock fell far behind the market. Here is the accounting of what that cash really bought.
PayPal (PYPL) operates the digital wallet and payment network millions use for everything from online shopping to splitting a dinner bill. But while its service is familiar, its stock, trading around $59.78, has been a source of frustration, sitting about 34% below its two-year high. Against that backdrop, the company has executed one of the largest capital returns in the market. Over the last five years, it handed back nearly $26 billion to shareholders, a figure equal to 51% of its entire current value. The company paid owners a fortune while the stock lagged; was holding worth it, and is it now?
A $26 Billion Payout Fueled Almost Entirely by Buybacks
The cash return machine is powered by the fees PayPal collects on its large payment volume, generating a free cash flow yield of 12.6%. The company then directs that cash back to its owners. The method, however, has been overwhelmingly one-sided. Of the total returned over five years, a huge $26 billion came from share repurchases, with just $252 million paid out as dividends.
This buyback-heavy strategy is designed to shrink the share count and boost earnings per share. It is a vote of confidence from management, using company cash to buy its own stock. But for the individual investor, the real measure is total return, which accounts for both price movement and dividends.
#back #fortune
PayPal (PYPL) operates the digital wallet and payment network millions use for everything from online shopping to splitting a dinner bill. But while its service is familiar, its stock, trading around $59.78, has been a source of frustration, sitting about 34% below its two-year high. Against that backdrop, the company has executed one of the largest capital returns in the market. Over the last five years, it handed back nearly $26 billion to shareholders, a figure equal to 51% of its entire current value. The company paid owners a fortune while the stock lagged; was holding worth it, and is it now?
A $26 Billion Payout Fueled Almost Entirely by Buybacks
The cash return machine is powered by the fees PayPal collects on its large payment volume, generating a free cash flow yield of 12.6%. The company then directs that cash back to its owners. The method, however, has been overwhelmingly one-sided. Of the total returned over five years, a huge $26 billion came from share repurchases, with just $252 million paid out as dividends.
This buyback-heavy strategy is designed to shrink the share count and boost earnings per share. It is a vote of confidence from management, using company cash to buy its own stock. But for the individual investor, the real measure is total return, which accounts for both price movement and dividends.
#back #fortune
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