NYSE Euronext to Buy Back $1 Billion

Updated from 11:06 a.m. EDT

Big Board operator NYSE EuronextNYX on Tuesday announced a $1 billion stock buyback program, increased its dividend and unveiled a new partnership with a Middle Eastern exchange.

Beginning in the second quarter, the exchange will increase its annual dividend to $1.20 a share from $1, paid on a quarterly basis. Under Securities and Exchange Commission rules, it cannot begin the stock buyback while its deal to by smaller rival, the American Stock Exchange, is pending.

NYSE Euronext also continues to expand beyond the U.S. stock market. On Tuesday it said it had entered a joint agreement with the Abu Dhabi Securities Market, through which it will develop new opportunities in trading systems and other related technology, investor and issuer services and investment products.

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According to a company statement, by the end of this year NYSE Euronext will provide its new partner with state-of-the-art information and market infrastructure systems and technology to host all financial instruments admitted to trading on Abu Dhabi Securities Market. In addition, the two exchanges will explore the development of new ventures, including the implementation of Abu Dhabi Securities Market's derivatives market.

NYSE Euronext CEO Duncan Niederauer has been very busy leaving his imprint on the exchange, which he assumed leadership of when then-CEO John Thain left in December to take the top job at Merrill LynchMER. Just last week, the exchange decided to purchase the CME Group's CME metals trading platform for an undisclosed amount. And earlier this month the Federal Trade Commission gave its approval for the proposed acquisition of the American Stock Exchange.

NYSE Euronext shares were up 5.1% to $59.33 in recent Tuesday morning trading.

While the stock buyback and dividend increase are generally seen as positive events for shareholders, there is some concern over the debt levels at the company as it attempts to diversify its dependence on the U.S. stock market. The continual changes make it difficult to compare numbers from quarter to quarter, but the steps that Neiderauer has taken are viewed as proactive attempts to keep the company competitive.

"We see the exchange landscape transforming from one with a predominantly domestic focus, to one of international competition," writes Jason Willey of Standard & Poor's. "We view this as particularly true for new company listings where [NYSE Euronext] is facing pressure from Asian and European exchanges. While we see risk from acquisition integration and regulatory changes, we believe [the company] is taking the right steps to position itself for what we view as a global competitive environment." Willey has an $80 target price on the stock and rates the company as a hold.

Daniel Harris, an analyst at Goldman Sachs, recently wrote that the exchange's recent spate of acquisitions of smaller platforms added needed diversity. Harris has a neutral rating on the stock and a $90 price target.

"[NYSE Euronext] is in various stages of completing a number of interesting integrations/initiatives that should position it to benefit from product diversity over the mid- to-longer term," Harris said. "Specifically, Wombat, the BIDS JV, and Amex should each help it broaden its product reach and somewhat offset any further market share losses in the U.S. cash equity business."

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