When a company buys back some of its own shares, it reduces the number of outstanding shares on the market and that increases the value of the stock. That means more cash back for investors.
Jane Seccombe, Senior Manager in Communications at Reynolds American Inc., said there seems to be a trend at the moment for corporations to announce new share buy-back programs, because of large amounts of cash on hand.
"We think this demonstrates our continuing commitment to returning vale to our investors. We also demonstrate this through our dividend in fact; we have had two dividend increases this year bringing the total dividend increase to 14.3 percent for 2011. I think it also signals our confidence in the business going forward," said Seccombe.
During the third quarter of this year, Reynolds American reported adjusted earnings per share of 70 cents, up 2.9 percent from the prior quarter.
Seccombe said the company's share buyback program will take place over the next two and a half years.
