Today, Canadian gold miner Kinross Gold (NYSE:KGC) is surging following the announcement of a new share buyback program. At the time of this writing, KGC stock is up 8% on the news.
This enhanced share buyback program will see the company commit to redistributing $300 million in capital to shareholders by the end of the year. Additionally, 75% of the company’s excess cash next year and in 2024 will be earmarked to be returned to shareholders. For those interested in KGC stock for its 3.7% yield, Kinross has indicated that it plans to maintain payouts but focus on the buybacks.
Notably, this move has come at the behest of activist investing firm Elliott Investment Management. When Elliott gets involved in the inner workings of a company, investors usually stand to benefit. This appears to be the case with Kinross today.
Let’s dive into what KGC stock investors may want to make of this news.
Is Now the Time to Buy KGC Stock Prior to Buybacks?
Rising commodity prices have certainly bolstered the balance sheets of many producers. In the precious metals mining space, companies like Kinross actually appear to be in the best shape they’ve been in for some time.
Now, for those taking a historical view at this sector, poor capital allocation decisions have led to significant strife in years past. Accordingly, many companies (such as Kinross) have taken a more conservative approach to allocating cash back to shareholders. In many ways, this makes sense. When times are good, stockpiling cash for difficult times makes sense.
That said, for investors looking for greater shareholder returns, this is great news. The company’s buyback program should boost earnings per share (EPS) substantially, further inducing a broader investor base.
Kinross’ yield is already juicy and appears sustainable. Perhaps a buyback boost is all KGC stock needs to rally further over time. Today, that’s what the market appears to be pricing in.
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On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.