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Pandora Set to Raise Share Buybacks as Dividends Take Back Seat

Updated on
  • Analysts comment on payback outlook after capital markets day
  • Buybacks now would allow Pandora to own more at lower cost

Pandora A/S this week renewed a pledge to return cash to its beleaguered investors. Reading between the lines, analysts who track the company say management is preparing to increase the proportion of share buybacks at the expense of dividends.

Chief Financial Officer Peter Vekslund and Chairman Peder Tuborgh on Tuesday said the jewelry maker is reviewing the split between the two kinds of shareholder payouts. They said more details will follow in connection with Pandora’s fourth-quarter results, due to be released on Feb. 6.

“I think it’s fair to assume that the board is potentially planning to increase the share buyback proportion of the returns this year as it seems that the buyback has proportionally been much lower in 2017 than previously,” Tue Ostergaard, head of equities at ABG Sundal Collier in Copenhagen, said by phone.

Last year, Pandora paid 4 billion kroner ($660 million) in dividends and spent just 1.8 billion kroner on share buybacks. In the beginning of 2017, a Pandora share cost about 900 kroner compared with about 600 kroner now. That means Pandora can get about 50 percent more of its own stock today than a year ago, for the same price.

“At this share price level the company may consider increasing its share buyback program,” Zuzanna Pusz, an analyst a Berenberg, said in a note on Wednesday. “While the total shareholder returns level is not expected to change, management is reconsidering the mix between dividends and buybacks amid recent share price performance and shareholder feedback.”

“Fundamentally, it doesn’t make much difference from an investment perspective, but there may be individual shareholders who have strong opinions about dividends versus share buybacks,” Ostergaard said. Pandora’s CFO said he was fully aware the new split may meet a mixed reaction from owners, and that the board will take all considerations into account before making a decision.

Executive Pay

Pandora may also chance the triggers in its incentive plans for management. Currently, Chief Executive Officer Anders Colding Friis has two plans which are both tied to the company’s profitability and sales growth. Friis said the board is reviewing the options, including looking into potentially linking executive pay to share performance.

The incentive system remains “a key question” and “investors are awaiting an update,” Pusz at Berenberg said in the note.

— With assistance by James Cone, and Nick Rigillo

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