On March 2, 2015, Best Buy Co. announced that it planned to repurchase up to $1...

On March 2, 2015, Best Buy Co. announced that it planned to repurchase up to $1 billion of its common shares. The company also announced on that day that an increase in its quarterly dividend from $0.19 to $0.23 per share, and a one-time special dividend of $0.51 per share. The special dividend resulted from a windfall legal settlement related to the manufacture of liquid crystal displays it had sold.

Which method of returning capital to investors (repurchases, regular dividends, special dividends) do you think is viewed by shareholders most favorably, and why?

Expert Solution

Best B Co. sold manufacture of liquid crystal displays has a huge some of money within the company,investors may have different views to utilise this money that holding it as surplus. As keeping money won't either increse company value nor get into hands of shareholders.

Shareholder's View on (Repurchase,dividend)

In consider divdend and share repurchase as a factor affecting interest of stakeholder there are some aspects based on the interest of shareholders.

Current Source of income

Some investors may have this investment as only source of income so that kind of investor prefer to have a regular dividend.

-A special dividend is more advantageous in this case as more current income received.

- Share repurchasing as an option to selloff share to get a bulk amount of money.

Increasing Value of Investment

Ther are investors who required to increase in long term value of their investment that is share price by company investing in positive NPV projects or in this case a buyback increase holding power of remaining investors.

Increased future Dividend

After buying back shares number of shares in issued in stock market will reduce and effective dividend per share increases. This will be the interest of investor get more stake of ownership in company without buying new shares through repurchase.

Based on these theories there are mainly Three view points one is for Dividend,other for Repurchase and finally of Part Dividend plus repurchase.

In case of Dividend some prefer Special dividend of $0.51 as sum of money received. But there will be a concept at the same time that regular dividend to be paid and remaining money used to sahre buyback.

ekkarill92 answered 1 year ago

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