Are Oracle’s Investors Happy with Its Share Buybacks?

Oracle added $12 billion to its share buyback program

Cloud services company Oracle (ORCL) recently announced a $12 billion increase to its share repurchase program, which shows that the company is banking on growing its cash flows and expects its earnings growth to continue.

Share buybacks also boosted the company’s earnings in its first quarter of fiscal 2019, which ended on August 31, 2018.

Are Oracle’s Investors Happy with Its Share Buybacks?

Oracle pays a smaller dividend than its peers

Though Oracle has rewarded its shareholders through buybacks, the company has been very conservative in terms of dividends. In the first quarter of fiscal 2019, some analysts expected a dividend rise, but it didn’t happen.

Oracle last raised its dividend in March 2017 from $0.15 per share to $0.19 per share. With an annualized dividend of $0.76 per share, the company’s dividend yield is ~1.6% at $49.03 as of September 18, much lower than the yields of other established tech players. IBM has a yield of 4.2%, Qualcomm (QCOM) has a yield of 3.3%, Cisco has a yield of just under 3%, and Intel (INTC) and Texas Instruments both have yields of over 2%. Microsoft (MSFT) is almost in line with Oracle.

Further, Oracle hasn’t been able to grow its revenue, though it has managed to deliver cheaper cloud computing services than Amazon’s (AMZN) Amazon Web Services and Microsoft Azure.

Sluggish revenue

In the latest quarter, the company posted revenue of nearly $9.2 billion, which missed analysts’ consensus expectation of $9.28 billion. Its top line grew 1% YoY (year-over-year) in the quarter due to currency headwinds. It was up 2% on a constant currency basis. The company’s revenue growth has been declining for the past four straight quarters.

For the second quarter of fiscal 2019, the company expects its revenue to be flat to up 2% YoY on a constant currency basis. Foreign exchange is expected to dent its revenue growth by 2%. For fiscal 2019, which will end in May 2019, Oracle plans to achieve higher revenue growth rates than in fiscal 2018.