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)