Saturday, August 24, 2013

Share Buy Backs

Killam Properties Inc. is a corporation (NOT A REIT ) , listed on the Toronto Stock Exchange, that deals with rental real estate.  Killam Properties Inc  made their  first purchase in 2002.   Killam Properties has properties that are located in Atlantic Canada and Ontario. Killam Properties Inc. also own  44 manufactured home communities, or land lease communities that are located in Atlantic Canada in Ontario. Killam Properties Inc. can keep more of the profits to grow the company as they are not obligated to pay out 90% of their profits to investors like a REIT.  Killam Properties pays a dividend as it is a corporation whereas a REIT pays a distribution.

Killam Properties Inc. recently been approved to buy back 2500000 shares over a 52 week period.   The shares will be retired when Killam purchases them on the open market. 

Why would a company buy back its own shares? A company will buy back its own shares when they feel the share price of their stock doesn't accurately represent the current value of their company. Buybacks can be a good use of company funds at the right price and beneficial to remaining investors as these investors get to own a bigger percentage of the company.

As of this post, I currently own 395 shares of Killam Properties Inc. I get to own a bigger percentage of this company at no cost to me. As the amount of shares outstanding decreases, the share price will likely increase due to supply and demand issues.

When shares are retired  as a result of buy backs the EPS automatically goes up and vice versa when the company issues more shares.   This could fool investors. So investors need to do their due diligence  in which they can discover an increase of decrease in the amount of shares outstanding, and in turn earnings year to year.

Disclosure  : Long KMP.TO (Killam Properties)


     I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.  Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk

1 comment:

  1. I think a lot of retail investors overlook the benefits of a share repurchase program. I prefer dividends and getting cash but barring that its nice to see the share count drop.