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Sony stock jumps after first-ever share buyback announcement

Reuters  |  TOKYO 

By Yamazaki and Junko Fujita

(Reuters) - announced its first-ever major share buyback on Friday, worth 100 billion yen ($910 million), helping its stock recover from a hammering days earlier when investors freaked over lacklustre earnings.

The announcement marked Japan's second major buyback this week after tech investor scheduled the repurchase of 600 billion yen in shares using proceeds from the IPO of its telecoms unit, sending its stock price soaring.

Japanese firms have been increasing buybacks as investors call for higher returns in a country not known for showering its shareholders in riches. The government has also chimed in, hoping higher returns will attract more foreign money to

The amount of buybacks announced by listed companies has jumped around 2.5 times over the past five years, according to financial data service firm

In the past week, buyback announcements have accompanied the earnings reports of Yamaha Corp, trading house Itochu Corp, firm and Tobacco Inc.

Sony said its buyback, its first ever aimed at boosting shareholder returns, will be equivalent to 2.36 percent of its outstanding shares and will be conducted through March 22. Its shares closed 4 percent higher at 4,906 yen on Friday.

"Our financial health has improved enough to conduct the repurchases," a Sony said, adding that recently low share prices were also a factor in its decision.

Sony shares plunged 14 percent to their lowest in over a year after the firm reported sagging numbers in its previously thriving gaming business. Sony also cut its outlook for sensors, citing weakness in the global market.

Analysts nevertheless applaud Sony's turnaround in the past few years spearheaded by Kenichiro Yoshida, first as and, since last year, as The firm struggled for profitability as its business lost market share to Asian rivals, before reinventing itself as an entertainment firm with stable revenue from music content and gaming.

Hiroyasu Nishikawa, at IwaiCosmo Securities, said the buyback showed how Sony had become more sensitive to investors in recent years.

"This announcement was well timed, and it shows it's watching the market very well," he said. "In the past few years Sony gradually started recovering what it'd lost in the previous 20, 25 years. This latest move is one that's attuned to the stock market."

Sony has been steadily increasing shareholder return through higher dividends over the last couple of years, paying 7.09 percent of its profit in dividend in the last fiscal year, Refinitiv data showed. That compared with 22.5 percent at U.S. Apple Inc.

Stephen Givens, a based in Tokyo, said while Sony's and SoftBank's buybacks may have been aimed shoring up stock prices, they were a part of the trend of Japanese firms seeing the advantages of buybacks compared with cash dividends.

"A stock buyback gives shareholders a choice to sell out or stay invested, whereas a dividend forces all shareholders not only to disinvest but to pay tax at higher rates on the cash dividend than they would pay if they sold their stock back to the company," he said.

($1 = 109.7700 yen)

(Reporting by Yamazaki and Junko Fujita; Writing by Ritsuko Ando; Editing by and Christopher Cushing)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, February 08 2019. 14:43 IST