BlackRock stock buybacks continue though CEO warned against repurchases

By Trevor Hunnicutt

NEW YORK (Reuters) - The world’s largest asset manager BlackRock Inc (BLK.N) has been buying roughly $275 million of its shares every quarter, a practice chief executive Larry Fink said could continue even though he has previously warned about the downside of share repurchases.

Buybacks can boost earnings per share figures because the practice lowers the number of shares on issue and in the past Fink has said that executives have relied too much on buybacks and dividend increases rather than making long-term investments.

On Thursday, Fink defended BlackRock’s buybacks and dividends, arguing they are aligned with the company’s long-term goals and a prudent use of excess capital. The company raised its dividend 5.0 percent last quarter from the year prior.

“Our policies have not changed in years - we’ve been as consistent as anybody,” Fink told Reuters. “Where we have excess capital, we redistribute that back.”

Buybacks have been a significant force in the S&P 500 stock index’s (.SPX) rise to record highs in recent years. Companies in that index bought back $161 billion of their stock in the first quarter of this year, the second-largest figure on record, according to S&P Dow Jones Indices, though announcements of upcoming buybacks has slowed. [nL1N19J0V2]

As a champion of what he calls “long-termism,” Fink has criticized executives for their use share-boosting measures to pacify activist investors.

“We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment,” Fink said in a letter this year to company executives. Last year, he said some executives have under-invested in “innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth.” [nL2N0XB28O]

As the world’s largest asset manager, New York-based BlackRock is a top shareholder of public companies.

On Thursday the company said its profit fell 3.7 percent, as investors shifted to stocks from cash and bonds during a volatile second quarter, hurting fee income. [nL4N1A03PB]

Dividends and buybacks have helped the company sustain its venerated status on Wall Street and its stock price has risen 4.5 percent this year, compared to a Dow Jones peer-group benchmark (.DJUSAG) that has fallen 5.5 percent.

“What we like most about it - it’s very consistent. When the market goes through cycles, especially tough times, you’ll see a lot of asset managers cut back,” said Edward Jones analyst Kyle Sanders. “Larry and the management team is pretty consistent on delivering returns to investors.”

BlackRock bought $275 million of its stock in the latest three-month period, roughly on par with its purchases for the last six quarters. BlackRock also paid $2.29 per share in dividends, up 5.0 percent from the year before.

“Our whole focus is in investing in our future,” Fink said. “The stock repurchase component of that is a remainder. As we’ve gotten larger as an organization we have increased our stock repurchases.”

Fink said the company continues to examine where to invest in addition to buying shares. Even as the company cut expenses and headcount earlier this year, Fink said the company will continue to hire and spend on areas of prospective growth, including on its technology service, Aladdin.

(Reporting by Trevor Hunnicutt; Editing by Linda Stern)

Serves 4     Prep 20 minutes

Lemon Cream Pie Milkshakes

Give your oven a break in this summer heat and turn your lemon pie into a milkshake! Tangy lemon curd, creamy vanilla ice cream and crunchy cookies are combined to make a cooling, sweet treat.

Yield: 4 shakes

Preparation: 20 minutes

Lemon Whipped Cream
½ cup heavy whipping cream, cold
2 teaspoons powdered sugar
½ teaspoon lemon zest

½ cup lemon curd**
3 cups vanilla bean ice cream
1 ½ cups milk
4 shortbread cookies or sugar cookies
Lemon slices for garnish

To make the whipped cream, add the heavy cream to a mixer fitted with the whisk attachment. Whisk on high until soft peaks form and the cream holds to the whisk when lifted out of the bowl. Fold in the powdered sugar and lemon zest. Place in the refrigerator while making the shakes.

To make the milkshakes, combine the lemon curd, ice cream and milk in a blender. Puree until smooth, about 15 to 20 seconds. Pour an even amount of the shake into each of four glasses.

Crumble half of a cookie over each shake. Top each with an equal amount of the whipped cream. Crumble the remaining half of a cookie over each dollop of whipped cream. Top with a lemon slice and serve.

**You can make your own lemon curd using the recipe below. This recipe makes about 1 cup of curd.

Fresh Lemon Curd
½ cup freshly squeezed lemon juice
1/3 cup sugar
2 egg yolks
1 whole egg
Pinch of salt
6 tablespoons of unsalted butter, cubed
Zest of 1 lemon
¼ teaspoon pure vanilla extract

To make the lemon curd, use a double boiler. Add the lemon juice, sugar, egg yolks and egg to the top pan. Heat the water as you stir together the ingredients until smooth. Bring the water close to a boil and then reduce it to a simmer, adjusting as needed during cooking.

Add the butter and salt to the lemon curd. Continue to stir constantly until the butter is melted and the mixture begins to thicken. It is done when it begins to hold its shape when stirred, after about 10 to 15 minutes.

Remove it from heat, stir in the lemon zest and vanilla. (If solids formed during cooking, pour the curd through a strainer set over another bowl and gently stir the curd to press it through the strainer.) Allow the curd to cool.