Corning (GLW) did it again last month, raising its quarterly dividend 3.7% to 28 cents/share. That puts the indicated dividend yield at 3.25%. With money market funds now paying in the mid-high 4% range, and likely going above 5% once the Fed is done with the current tightening cycle, that yield may not look all that compelling. However, what is compelling is the company's continued streak of raising payouts to shareholders.
This most recent increase represents (by my count) Corning's 12th consecutive annual dividend increase. During that run, the company has grown the dividend at a 15% clip (CAGR). The pace has certainly slowed in recent years, but the streak has been maintained.
Corning's net reduction of share count via buybacks, however, appears to be a thing of the past. Between 2014 and 2019, the company reduced shares outstanding by 46%, from 1.4 billion to $762 million. While the company continues to buy back shares, including 7 million (worth $221 million) in 2022, share count is no longer falling, as buybacks no longer outweigh issuances.
Corning put its buyback efforts on hold during the pandemic, seemingly a good move at the time, but with 20/20 hindsight, the company could have scooped up shares in the high teens in 2020. That move would have required a great deal of courage at the time given all of the uncertainty, and likely would have been panned by shareholders and prognosticators.
I am a fan of stock buybacks when done correctly (especially when the company is also raising the dividend, the combination of the two can be powerful), however, the concept of buybacks is getting more scrutiny these days, namely due to the plight of Bed Bath & Beyond (BBBY) .
The struggling retailer, which may be on the verge of bankruptcy, reduced share count by 63% between 2013 and 2022, and spent a boatload doing so. Meanwhile, net debt rose from -$905 million (which means that there was net cash on the books), to $3.1 billion in 2022.
Essentially, the company was funding buybacks through debt, in a time of declining operating performance, a terrible combination. Buybacks are only effective when shares are bought back at relatively low prices. By my count, between 2013 and 2022, BBBY spent more than $7.5 billion on buybacks, for shares that now trade in the $1.50 range.
Despite BBBY's miscues, buybacks can still be good for shareholders, when done correctly and opportunistically.
Of course, Congress and the current administration recently took aim at buybacks with a ridiculous 1% corporate excise tax as part of the Inflation Reduction Act, or as I call it "The Unicorn and Leprechaun Full Employment Act."
For more on the subject, Paul Price's recent column is a must-read.
