BlackRock stock buybacks continue though CEO warned against repurchases

Thu Jul 14, 2016 4:15pm EDT
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By Trevor Hunnicutt

NEW YORK (Reuters) - The world's largest asset manager BlackRock Inc (BLK.N: Quote) has been buying roughly $275 million of its shares every quarter, a practice chief executive Larry Fink said could continue even though he has previously warned about the downside of share repurchases.

Buybacks can boost earnings per share figures because the practice lowers the number of shares on issue and in the past Fink has said that executives have relied too much on buybacks and dividend increases rather than making long-term investments.

On Thursday, Fink defended BlackRock's buybacks and dividends, arguing they are aligned with the company's long-term goals and a prudent use of excess capital. The company raised its dividend 5.0 percent last quarter from the year prior.

"Our policies have not changed in years - we've been as consistent as anybody," Fink told Reuters. "Where we have excess capital, we redistribute that back."

Buybacks have been a significant force in the S&P 500 stock index's .SPX rise to record highs in recent years. Companies in that index bought back $161 billion of their stock in the first quarter of this year, the second-largest figure on record, according to S&P Dow Jones Indices, though announcements of upcoming buybacks has slowed. [nL1N19J0V2]

As a champion of what he calls "long-termism," Fink has criticized executives for their use share-boosting measures to pacify activist investors.

"We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment," Fink said in a letter this year to company executives. Last year, he said some executives have under-invested in "innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth." [nL2N0XB28O]

As the world's largest asset manager, New York-based BlackRock is a top shareholder of public companies.   Continued...

BlackRock Inc Chief Executive Officer Larry Fink is pictured at a business roundtable meeting of company leaders and U.S.  REUTERS/Jason Reed/Files