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With a yield of 5.43%, Xerox Holdings Corp (XRX) may be an attractive investment for those seeking high current income and for traders looking for a possible takeover target. High growth and being a member of the elite “Nifty-Fifty” have long passed. Terrible decisions by management, including Carl Icahn who is a major shareholder, have made matters worse, in my opinion. With the stock price dropping down to only the high teens, Xerox is a potential takeover target and HP Inc. (HPQ) might be an interesting suitor.
$1.00 Annual Dividend
Stock Repurchases Negative Impact On Dividends
While operations have been anemic for a number of years, Xerox was hit hard by the pandemic when employees worked from home, and by supply chain issues. One of the biggest problems that income seeking investors face with Xerox, is the extremely large and, in my opinion, irrational stock repurchases over the last few years.
Quarterly Repurchases of XEROX Stock
| Date | Value |
|---|---|
| December 31, 2021 | 388.00M |
| September 30, 2021 | 87.00M |
| June 30, 2021 | 251.00M |
| March 31, 2021 | 162.00M |
| December 31, 2020 | 150.00M |
| September 30, 2020 | 150.00M |
| June 30, 2020 | 0.00 |
| March 31, 2020 | 0.00 |
| December 31, 2019 | 232.00M |
| September 30, 2019 | 68.00M |
| June 30, 2019 | 197.00M |
| March 31, 2019 | 103.00M |
| December 31, 2018 | 416.00M |
| September 30, 2018 | 284.00M |
Source: Ycharts
A major reason why Moody”s downgraded their Corporate Family Rating in February was because of “Xerox’s willingness to fund significant share buybacks in 4Q21 evidences aggressive financial policies in light of weak 4Q operating results”. Xerox used $888 million to repurchase shares in 2021, but the current stock price is about eight points lower now than it was the same day last year. Using the 198 million shares at the beginning of 2021, this $888 million could have alternatively been used to pay $4.48 per share in additional dividends in 2021, instead of being used for share repurchases or it could have been used to reduce debt of this highly leveraged company, or even increased CAPEX.
Net cash from operations was $629 million in 2021 compared to $181 million paid in dividends and $888 million used for share repurchases. I just do not understand what Xerox and Carl Icahn were thinking when they decided to spend so much cash on repurchases. So the problem seems …….
Source: https://seekingalpha.com/article/4495406-xerox-a-good-yield-and-a-potential-buyout-target
