Oracle’s share buyback program and dividends
Unlike other players in the software industry such as SanDisk (SNDK), EMC (EMC), and IBM (IBM)—which started paying dividends to its shareholders in 2013, Oracle (ORCL) started dividend payments in 2009. Dividends aren’t common in the technology space. Google (GOOGL), despite all the pressure surrounding it, doesn’t pay a dividend.
In its 1Q15 quarterly results, Oracle announced the addition of $13 billion to its buyback plan. Oracle spent approximately $2 billion on share buybacks in each of the last three quarters. It also declared a quarterly cash dividend of 12 cents per share.
In fiscal 2014, Oracle repurchased shares worth $9.8 billion and paid dividends amounting to $2.1 billion.
The chart above shows the EPS and free cash flow per share of Oracle. Both EPS and FCF per share are increasing.
Cash, debt, and cash flows
In 1Q15, Oracle generated $14.8 billion in free cash flows. As of August 31, 2014, Oracle has cash reserves of $24 billion and total debt of $32.5 billion. FCF as a percentage of net income from the last five quarters has been in the range of 128%–135%.
Free cash flows to fund share repurchases
In 1Q15, Oracle reported operating cash flows of 6.7 billion, an increase of 7% from the corresponding quarter last year. A steady increase in cash flows, decent cash reserves, and low debt levels, combined with an increase in dividends and share buybacks, show Oracle’s potential and its focus on increasing shareholder remuneration in the future.