Yahoo (YHOO) is an interesting buy candidate among big web players because it can liquidate significant non-core assets and because its new CEO is redefining the firm. Shares of Yahoo are more attractively priced than its well-loved competitors Facebook (FB) and Google (GOOG).
Too Much Cash
Yahoo shares have been flat this year, and investors are encouraging the company’s new CEO to forego paying a dividend and instead buy back shares using sales proceeds from its roughly $3 billion stake in Alibaba. According to analysts, a buyback would be a signal that the CEO is confident in Yahoo’s prospects for growth.
Yahoo already used $646 million to buy back stock following its sale of Alibaba. The board is still deciding what to do with the remaining money from the transaction. Investors might want the dividend, but those looking for a long term relationship with the company would rather see a repurchase.
A one-time buyback could signal that the CEO has the ability to bring back advertisers and users who have since moved over to other search engines and social networks. By contrast, establishing a dividend policy could be interpreted as an admission by management that it does not know how to bring the business back to life. In the tech sector dividends are often seen as a signal for a lack of vision, a scarcity of compelling investment projects, and a bribe for investors if only to keep them on board. To continue reading, click here.