Few phenomena in the stock market are more predictable than oil major Exxon Mobil’s (XOM) massive share buyback program. Until now.
The company, which has spent about $210 billion over the last decade buying back its own stock, is bowing to the reality that crude’s sharp downturn is hurting its bottom line. It surprised investors on Tuesday by dramatically ratcheting back share repurchases, and for the first time in 15 years, Exxon Mobil will only buy back shares to offset dilution as opposed to return cash to shareholders.
Exxon reported its smallest quarterly profit in more than a decade and said it will cut 2016 spending by one-quarter and suspend share repurchases.
It is an unusual move as Exxon has spent more on share buybacks than any other company in the past 10 years, according to S&P Dow Jones Indices figures, and it’s not even close. It far surpasses second-place Microsoft (MSFT), which has bought back $125 billion in that time.
“Exxon was the poster child for that and they haven’t done so much of that lately,” said Howard Silverblatt, senior index analyst at S&P Dow Jones.
In 2015, the company bought back $4 billion in shares, which was the smallest amount it spent since 2000. Back then, Exxon spent $1.86 billion on repurchases, but it was a net issuer of shares in the first two quarters of that year.
For the first quarter of 2016, the company could still be a net purchaser of shares, because stock grants to employees through benefit plans and options programs means it will need to buy back stock to offset dilution, the company said Tuesday.
The move comes as its shares fall within 15% of a five-year low—when it would be more advantageous to repurchase its stock.
Large companies have been criticized for excessive spending on buybacks to reduce share counts, which help boost earnings per share, rather than investing in capital expenditures or research.
Exxon has long been known for cash distribution. It is one of the S&P’s so-called “dividend aristocrats,” referring to companies that have increased their dividends every year for 25 consecutive years. For this past year, it spent more than $15 billion on dividends and buybacks.
The company’s buyback program peaked in 2008, when it repurchased nearly $35 billion in shares—a year when the stock price averaged $81.36 a share.