Friday, April 11, 2014

4 Reasons Why Toyota Is Buying Back Shares

This  article was originally published by Seeking Alpha on March 27, 2014

By Sarfaraz A. Khan


  • Toyota has announced a $3.5 billion buyback plan.
  • The company's ADRs have lagged behind its rivals.
  • The company is sitting atop a massive pile of cash which is bigger than Tesla's market cap.
  • The company has fallen behind other leading S&P 500 companies in terms of returning cash to shareholders.
  • Toyota is eyeing record levels of profits and sales.
After a gap of five years, the world's leading automaker Toyota Motors (TM), has finally decided to buy back shares. Following a shareholders' meeting in June, the company will start purchasing shares worth $3.5 billion over a 10-month period.

So why is Toyota buying back shares?

Firstly, Toyota's shares have lagged behind the S&P 500 and some of its rivals. A buyback at this stage could give a boost to investors' confidence. In the last 12 months, the S&P 500 has risen by more than 18%, Toyota's biggest rival General Motors (GM) has been up 23% while the German automaker Volkswagen (OTCQX:VLKAY), which trades in the OTC market, has risen by 30%. On the other hand, Toyota's American depository receipts have been up by just 8.3% in the corresponding period.

Secondly, Toyota has a lot of cash. Toyota's previous quarterly results revealed that the company's cash reserves had grown by 24% from the corresponding period last year to an enormous $34.9 billion. In other words, Toyota had $9.3 billion more cash than Tesla's (TSLA) current market cap. The auto giant was truly sitting .. read full article at Seeking Alpha