Intuitive Surgical’s capital allocation strategy
Intuitive Surgical (ISRG) has been returning capital to its shareholders largely through share buybacks over the years. The company doesn’t pay out dividends. Intuitive Surgical has always reinvested the majority of its capital in research and development and growth through strategic M&As (mergers and acquisitions).
In 1Q17, Intuitive Surgical invested approximately 11% in research and development, which is higher than the average expenditure in R&D by peer companies in the medical device industry. Intuitive Surgical increased its authorized share repurchase program in December 2016 from $1.0 billion to $3.0 billion. As of March 31, 2017, the company’s aggregate authorized amount for stock repurchases stands at $6.2 billion. However, the remaining authorized share repurchase amount is $991.6 million.
Accelerated share repurchase program
In 1Q17, the company repurchased around 2.4 million shares amounting to $2 billion as part of its accelerated share repurchase program with Goldman Sachs. As of March 31, 2017, Intuitive Surgical has cash, cash equivalents, and investments of about $ 3.1 billion. This represents a decrease from $4.8 billion as of December 31, 2016.
Investors can gain exposure to Intuitive Surgical by investing in the iShares Edge MSCI Min Vol USA ETF (USMV), which invests 1.3% of its portfolio in ISRG.
Continue to the next article to take a look at the stock’s recent performance.