Eight years and nearly $49billion (£25 billion) later, BP is finally reining in its blockbuster share buyback programme. The world's third-biggest oil major accompanied yesterday's full-year results with the declaration of “a shift in the balance between dividends and share buybacks as a means of returning value to shareholders”.

In short, that rethink translates into a 31 per cent increase in the fourth-quarter dividend to 6.8p in sterling terms, against expectations of a 10 per cent rise, and 7 per cent increase for the year as a whole. For US dollar investors, the full-year out-turn was even better - up 16 per cent. That unexpected bump-up in the payout ensured that BP was one of only three constituents of the FTSE 100 to see its shares rise. A switch in emphasis away from buybacks is partly pragmatic: having retired 16 per cent of its outstanding shares since the turn of the decade, a higher dividend is now more affordable.

But it also sends a powerful signal: halting a share buyback programme is palatable to institutional investors in a way that cutting a dividend is not. The inference is that, one year into Tony Hayward's tenure as chief executive, BP has increasing confidence in its ability to generate sizeable sums of cash. Not that such optimism was evident from yesterday's numbers alone. Fourth quarter replacement cost net income of $4 billion, some 8 per cent below consensus forecasts. What was expected was that the culprit was BP's problematic US refineries business, which takes in Texas City and Indiana's Whiting.

The company lost $192 million worldwide in refining and marketing but a hefty $834million in the US - nearly twice the level of the previous year. Although the company reported an above-forecast performance in its upstream operations - fourth-quarter production was down a better than expected 3 per cent - the benefit was offset by a higher tax charge.

With the problems in the US refineries nearly resolved - which will reduce the drag from heavy repair and maintenance spending - the focus should return to Mr Hayward's restructuring efforts and BP's newer producing assets.

On the view that BP's long period of underperformance against Shell is nearing its end, the shares, at 543p - yielding 5 per cent and trading at nine times 2008 earnings - are worth tucking away for the long term. Buy.

ARM Holdings

When ARM Holdings predicted a “meaningful uplift” in fourth-quarter revenues back in October, it clearly did not have in mind the modest 3.7 per cent increase that it turned in yesterday.

But then evidently the world of the Cambridge-based semiconductor designer has changed over the past three months. The autumn's confidence - ARM had just signed three big licensing deals - has given way to caution. All it will say now is that this year's growth in US dollar revenues will “at least” match the 6 per cent achieved in 2007 - creditable, perhaps, but a severe disappointment given consensus expectations of a 15 per cent rise.

Like all semiconductor stocks, ARM is hostage to the fortunes of its end markets in electronics, so a poor outlook for consumer spending means that caveats are inevitable. Yet ARM must also prove itself strategically. A question mark still hangs over Artisan, the badly received American acquisition of four years ago: revenues from ARM's physical IP division again missed forecasts, down 30 per cent on the year. The one target conspicuously met in 2007 was the return of £147 million of cash through dividends and buybacks although, given yesterday's 20 per cent slide in the shares, that is nothing to cheer.

Deferred revenue recognition from one of last year's big deals provides some comfort. So, too, does the growth of ARM's licence base: high-margin royalties continue to rise strongly, with the effect that a 6per cent sales increase should still deliver a 16 per cent rise in earnings.

Even so, at 94p, the shares sit at 17 times 2008 earnings, which seems steep given the danger of further downgrades. Avoid.

Carpetright

Shareholders of Carpetright have more reason than most to rue the credit crunch: at last night's close, shares in the FTSE 250 retailer sat 37 per cent below the £12.50 management buyout offer by Lord Harris of Peckham, its founder, that was derailed by the downturn four days before Christmas.

Not least, a takeover would have spared them the sight of yesterday's third-quarter trading update. After a solid November, trading in Britain has weakened, unsurprisingly, over the past two months to run 4 per cent lower on a like-for-like basis - which implies falls of up to 7 per cent in recent weeks. The consolation is that the company expects to meet full-year profit forecasts for the 53 weeks to May 3. That it does partly reflects weak comparatives in 2007 - like-for-likes were down sharply in the fourth quarter - as well as cost savings from staff cuts and the rental income that it will receive from its Sleepright concessions, of which there are now about 70.

The problem is that Carpetright is unlikely to have felt the full effect of the housing slowdown: weakness in sales so far appears to have been driven by poor consumer confidence rather than fewer people moving house. In its favour, Carpetright is well placed to take market share from struggling independents, while the shift to a national distribution centre should also bring further efficiency savings.

At 782p, the shares, although yielding 6.6 per cent, trade at more than 12 times current-year earnings, a premium to its sector. Sell.

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