Flush with cash after a strong earnings season and confident in the economy’s upward arc, corporations are preparing to resume buying their own stocks, a project that began in earnest after Republicans passed 2017’s corporate tax cut but were paused during the economic shutdown.
U.S. companies across a broad spectrum of industries announced buybacks worth $484 billion during the first four months of this year, according to the Financial Times, an amount that Goldman Sachs called the greatest in at least two decades.
JPMorgan Chase is buying back its own stock “because our cup runneth over,” CEO James Dimon said in a comment quoted by the FT.
Buybacks this year will exceed those of last year by 35 percent in a “buyback bonanza,” Goldman Sachs said in a research note.
In Europe, the volume will be up 25 percent year over year, according to Société Générale.
Companies like to buy their own shares because earnings per share increase if there are fewer shares in circulation.
Also, unlike stock dividends, buybacks can begin or end at the company’s discretion.
Tech companies, with windfall riches accumulated during the shutdown, have been especially aggressive in snatching back their own shares.
Alphabet and Apple announced $50 billion and $90 billion in buybacks, respectively, in April.
TRENDPOST: The trend of the Bigs getting bigger and investing in expanding their revenue stream persists… rather than re-investing to build their business and for capital improvements. It’s about supply and demand – the more stocks they buy, the less supply. The less supply, the higher the price goes.
