Aggressive shareholder returns! Share Buybacks & High Dividend Stocks, Amgen “AMGN”. Explains why net assets are declining but not a problem.
Amgen’s stock price, which is also a Dow Jones Industrial Average stock, has been stable and its share price has been on a steady upward trend.
What is noteworthy about this company’s chart is that the light purple area (stockholder's equity per share) is trending steadily downward.
It may seem strange that stockholder’s equity declines when the company has posted profits almost every quarter, but this company is proactive in returning profits to shareholders, paying dividends every quarter and occasionally buying back its own shares.
The effect of this is to reduce shareholders’ equity and lower the equity ratio. In other words, safety is lower. The equity ratio for the most recent fiscal year is only 1.5%.
On the other hand, capital efficiency increases because net assets decrease.
As explained in the chart above, the narrower the area of light purple (net assets per share) and the larger the area of light green (15 times earnings per share), the higher the capital efficiency (ROE).
The ROE for the most recent financial year is an astoundingly high 634.3%.
The net assets of REGN, discussed in the previous article, were on an increasing trend (i.e., they are accumulating equity capital without returning it to shareholders), so Amgen’s emphasis on shareholder returns is striking.
Incidentally, in the December 2017 quarter, the company posted its only quarterly loss for the last five years.
Specifically, this is due to a significant increase in the provision for income taxes of $6,478 million (2016: $348 million)
The significant increase in taxes is the result of tax reform.
https://www.drugdeliverybusiness.com/amgen-swings-loss-q4-6b-hit-tax-reform/
Amgen has not had a negative quarterly operating cash flow in the last five years.
In the December 2017 quarter, mentioned above, the company posted a large loss, but its operating cash flow, which measures the profitability of its core business, was perfectly acceptable.
Amgen “AMGN”. Stock Price and Quarterly EPS 15x Comparison Chart
https://www.tenq.cc/stocks/AMGN
View dividend information for the past five years.
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