Monday, July 9, 2007

Johnson & Johnson Buyback?

You are the CEO of a major Fortune 500 company business is good your stock is on a tear trading near all-time highs, things just couldn't be better. So what do you do next? Raise the dividend? Nope, that would be permanent and cost you real cash, every quarter.Of course, how stupid of me, you buy back $10 billion worth of your stock.

We get news that J&J is doing exactly that and borrowing some of the dough to do it. The chart above shows JNJ price action from the early 70's. Mighty impressive !! Time will be the judge but I am hard pressed to see that this is the best use of their cash and borrowings. JNJ shareholders better hope $60 holds or there could be some wailing and gnashing of teeth for sure.

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