Drop in share repurchases
Oracle (ORCL) generates strong capital returns for shareholders through regular dividend payments and share buybacks. In the last five years, the company has returned $53.9 billion to investors at an average of ~$10.8 billion per year. The company has used ~82% of its free cash flow every year to finance its capital return policy.
Oracle has bought $42.9 billion in shares over the last five years, maintaining an annual run rate of ~$8.6 billion. However, in fiscal 2017, the company repurchased $3.6 billion in shares, well below its annual run rate. In the first nine months of fiscal 2019, the company bought back $6.4 billion in stock, compared with $3 billion in the same period the year prior. The company’s aggressive acquisition goals may have affected its share buyback plans. Higher research and development costs related to new and innovative product launches may further impact its repurchase goals.
Similarly, in the last five years, tech giants Microsoft (MSFT), IBM (IBM), and Accenture (ACN) have repurchased shares worth $49.3 billion, $40 billion, and $12.8 billion, respectively. The graph above compares the tech giants’ shares repurchased in the last five years.
The company executed a new share buyback program of ~$24 billion in the first nine months of fiscal 2018. As of February, ~$22.8 billion was left in the company’s share repurchase program, meaning it could return to its aggressive share buyback mode at any time.