$736 Billion, the Cost of Treasury Stock for 23 Issues
May 23, 2012
– Comments (1)
What Cost $736 Billion and is on the Balance Sheet?
How much of owner’s cash have the issues in the Dow Jones Industrial Average exchanged for treasury shares? 23 out of 30 issues display the cost for treasury stock on the balance sheet. While 16 out of 30 issues display the number of treasury shares held on the balance sheet. It is unclear why the figures are not uniformly reported.
What is the cost of the treasury stock for the 23 issues that make an easy disclosure?
$736,445 million.
Here are the details. Issue and treasury stock cost in millions.
AA $3,898
BA $16,364
CAT $10,164
CVX $30,701
DD $6,627
DIS $30,325
GE $31,315
HD $6,694
IBM $114,020
JNJ $20,317
JPM $11,201
KFT $7,337
KO $32,364
MCD $28,982
MMM $11,794
PFE $33,519
PG $69,918
T $22,460
TRV $18,241
UTX $19,400
VZ $4,735
XOM $182,165
MRK $23,804
Total (millions) $736,445
Keep in mind if any treasury shares have been retired it would not be reflected in the cost of treasury shares. And the cost of repurchasing shares by 7 DJIA firms are not shown.
How large is the $736 billion cost of treasury stock sitting on the balance sheets?
It is $2,232 per capita, assuming the population is 330 million.
Think share repurchase return cash to owners?
Try this in a small group of 10. Use a sheet of paper to represent 1 share of stock. Pass out shares, and ask the owner to raise the share in one hand. All 10 can do it, right?
Now exchange cash for 1 share Then ask the owners raise a share in one hand and the cash in the other hand. How many can do it? No one. The 9 owners have a share but no cash. The former owner has cash but no share.
Now pay a cash dividend. Then ask the owners to raise the share in one hand and cash in the other hand. How many can't do it? The 9 owners, right?
Question for the CFA Institute:
Explain why some of its members suggest share repurchase programs provide cash to owners. Then explain how owners get the cash.
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