Dividend Policy - Autozone, Inc.

The case serves to achieve the understanding of the following objectives:

Identification of a high-performing company for which stock-price appreciation is consistent with other financial performance metrics such as EPS growth and ROIC

Share repurchases as a strategy for distributing operating cash flow

Impact share repurchases have on shares outstanding, earnings per share, and the book value of equity

Impact of repurchases on ROIC

Alternatives to repurchasing shares including financial uses (cash dividend and debt repayment) and operating uses (investing in organic and inorganic growth)

Hypotheses that share repurchases create real value or serve as a financial signaling tool that increases share price

Questions:

1.How has AutoZone's stock price performed over the previous five years? What other financial measures can you cite that are consistent with the stock price performance?

2.How does a stock repurchase work? Why would a company use this tactic? What impact does it have on: EPS? ROIC?

3.How much of AutoZone's stock price performance should we attribute to the share repurchase program?

4.Assume that AutoZone is planning to stop its share repurchase program. What would be the best alternative use of those cash flows? Why?

5.What should Johnson do about his holdings of AutoZone shares?

1. 2. 3. 4. Answer to the questions (Word Doc) Analysis of the Case (Word Doc) Excel spreadsheet files showing the work (Excel) PowerPoint Presentation