After the close on Tuesday, Sirius XM Holdings (NASDAQ:SIRI) announcedan eye-catching stock buyback considering the $26 billion market cap for the stock. The question, though, is whether the company offers an appealing yield considering the balance sheet hit to make these capital returns work.
Adding Debt
Sirius XM added $2 billion to a share buyback that now totals $12 billion in authorizations since early 2013. The amount is very sizable for what equates to a five-year period so far.
The biggest hiccup with the plan is that the satellite music company only forecasts generating $1.5 billion in free cash flow in 2018. Naturally, one can quickly see that Sirius XM can only return that $1.5 billion to shareholders in 2018 without using excess cash or borrowing to repurchase more shares.
