AutoZone Is Gobbling Up Its Own Stock (A Look At One Of The Great Buybacks Of The 21st Century)

Every now and then, you stumble across a company that does not show up on the radar of many investors, often due to its size, lack of a dividend, or decidedly unsexy business model that nevertheless ends up producing a whole lot of money for people that start a position in the stock and hold on to it for a few years. One company that falls into that category is Autozone.

What has the car part replacer done over the past ten years? Two things have happened at this business: one, they have rolled out new stores across the United States, increasing the store count from 3400 to a little over 5000. This has enabled the company to grow its profits from $500 million per year to a little over $1 billion per year. Given that there is no dividend, you might imagine that shareholders have doubled their money over the past ten years.

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Bed Bath & Beyond: When You Buy A Non-Dividend Stock

We’ll abandon the site’s namesake for the day and talk about times when it makes sense to buy shares of stock in a company that does not pay any dividends to shareholders. Generally speaking, the best candidates for these types of purchases are companies that offer a higher earnings per share rate than what you’d get from buying a traditional dividend stock.

After all, if you see a non-dividend paying company growing at 7-8%, why not just purchase BP and enjoy the added benefits of a high dividend that can reinvested and boost your annual income? Sometimes, you have a situation like DirecTV or AutoZone where the company is growing at a high-single dit pace, but is repurchasing stock instead of paying out a dividend, and thus can offer shareholders a total return in the 11-15% annual range.

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