Canada’s 5 Buyback Champions Revealed!

These companies put shareholders first.

| More on:
The Motley Fool

‘Short of a polygraph, the best sign of a shareholder oriented management – assuming its stock is undervalued – is repurchases. A polygraph proxy, that’s what it is.’ — Warren Buffett, Fortune Magazine 1985

As investors, what do we really want from management? We want them to be good stewards of our capital.

Ideally, every company will be able to reinvest all of its profits back into high return projects and grow the business at a quick clip.

But that’s not always possible. Many companies just can’t find many good investment opportunities. In this case, we hope management is disciplined enough to return excess capital to shareholders.

This is not to say that any company without a strong buyback track record is necessarily bad.

Take a wonderful business like Starbucks, for example. The coffee giant has generated an average 17.2% return on capital over the past five years. You know, I can’t find many investments that can earn those types of returns. Please, CEO Howard Schultz, keep my money.

On the other hand, most businesses aren’t on the same level as Starbucks. Many companies don’t have an unlimited backlog of great expansion opportunities. Unfortunately, many executives are eager to invest your capital into low-return ventures to pad their resumes and build their business empires.

Share buybacks ensure only the best projects are funded. That’s why when you see one, it usually indicates an investor friendly management team. Even better, they also increase your stake in a wonderful business without having to front additional cash.

So given that steady share repurchases are a good quality in a stock, let’s see who’s doing it the best.

In this investigation, I screened for medium and large-cap Canadian companies who had reduced their share count by at least 10% over the last five years. I call them my ‘Buyback Champions’. Here’re the results.

Canada’s Buyback Champions


Market Cap

5- Year % Change in Outstanding Shares

Tim Horton’s (TSX: THI)






Rogers Communications (TSX: RCI.B)



Metro (TSX: MRU)



MacDonald Dettwiler & Associates (TSX: MDA)



Source: Bloomberg

Two observations I made from this list. First, several of these firms are in boring industries. Coffee shops and grocery stores don’t scream high growth. But that doesn’t seem to matter, as these stocks have been some of the best market performers over the past five years.

That’s because buybacks allow investors to see the value of their share increase faster than the underlying business – on a tax deferred basis. It’s why even the shares of stagnant companies can still post impressive results.

Metro, for example, has reduced its share count by 17% over the past five years in a disciplined manner. Is this a good policy for shareholders? Well the grocery industry is a competitive, slow growing business. It’s a far better proposition to return capital to investors than to reinvest it back into the company.

Expect to see Tim Horton’s on this list next year as well. Tim’s plans to borrow $900 million to fund additional share repurchases. This will allow investors to take advantage of record low interest rates and increase their stake in the business.

Foolish bottom line
It’s no conscience that the companies on this list are also top performers. The fact that management has been steadily buying back shares indicates that they’re looking out for the interests of investors – a rare trait in the Canadian investment landscape. That’s a good reason to put these stocks on your holiday wish list.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Disclosure: Robert Baillieul has no positions in any of the stocks mentioned in this post.

More on Investing

Oil pumps against sunset
Energy Stocks

Is it a Good Time to Buy in the Energy Sector?

Boosted by a very bullish supply/demand environment, energy stocks like Canadian Natural Resources and Tourmaline have much further to go.

Read more »


2 Stocks to Buy Offering Better Value Than Air Canada

Air Canada has been a popular stock for years, but despite its low price, these two picks are much better…

Read more »

money cash dividends

How to Make $373/Month in Passive Income With These 2 TSX Stocks

You could bring in passive income of $4,482 annually, or $373 per month!

Read more »

clock time
Stocks for Beginners

3 Stocks to Start Investing Today

Looking for a set of stocks to start investing today? Here are some great options that offer growth and income…

Read more »

investment research
Dividend Stocks

Young Investors: Create Cash Flow With This Top Dividend Stock

If you're a young investor looking for cash flow, you need a strong dividend stock and solid banking program designed…

Read more »

Illustration of bull and bear

Is the Stock Market Selloff Over?

Throughout this week, many stocks have been gaining value and rebounding from their lows. So, is the stock market selloff…

Read more »

potted green plant grows up in arrow shape

Retirement 101: How Investors Can Turn $20,000 Into $500,000 in 25 Years

These top TSX dividend stocks have made some investors rich.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 Superb Dividend Stocks I’m Ready to Buy

The market is full of great options for income-seeking investors. Here are three superb dividend stocks to buy now.

Read more »