Now's is easy to see why Congress wanted a piece of S&P 500 stock buybacks. They're very lucrative.
Ten S&P 500 companies, including Alphabet, RTX and Meta Platforms, bought back $91 billion of their own shares in the fourth quarter, says just released data from S&P Dow Jones Indices. And shares of these top 10 stock buyback companies are enjoying a bump. They're up 10.4% this year on average, topping the S&P 500's 7.9% rise.
Buybacks are popular, despite Congress slapping them with a 1% tax in 2023. "Fourth quarter 2023 share repurchases were $219.1 billion, up 18% from third quarter 2023's $185.6 billion expenditure, and up 3.7% from fourth quarter 2022's $211.1 billion," said Howard Silverblatt of S&P Dow Jones.
Why S&P 500 Companies Buy Back Shares
The top driver for S&P 500 stock buybacks is simple. The companies are trying to stop their number of shares from inflating due to issuing stock awards to executives and employees, Silverblatt says.
As a result, the number of shares outstanding at the S&P 500 companies is falling by smaller amounts each year. Additionally, the $795.1 billion companies in S&P 500 spent on buybacks in 2023 is actually down from $923 billion in 2022.
But buybacks are still mostly paying off for investors of most the companies making them.
Biggest S&P 500 Buybacks
Ironically, the two largest buyers of their own shares in the fourth quarter don't highlight the trend.
Apple remains the heavyweight for buying its own shares. It paid $22.7 billion in the fourth quarter on its stock. That's more than any other company in the S&P 500. And yet, its shares are down more than 9% in the year so far.
Similarly, Alphabet was the No. 2 biggest buyer of shares to the tune of $16.2 billion. And its shares are up less than 6% this year, lagging the S&P 500.
But that's where most of the large disconnect end. Seven of the 10 largest buyers of stock are beating the S&P 500 this year.
Meta's Buyback Bounce
Meta is the best example of a huge post buyback gain. Shares are up more than 40% this year. The company in the fourth quarter of 2023 ponied up $8.2 billion buying back its stock.
Meanwhile, defense contractor RTX paid $10.3 billion buying its shares in the fourth quarter. That ranks it No. 3 in the S&P 500. And its shares are up 11% this year.
Expect more buybacks if S&P 500 companies keep making money hand over fist, like they are now.
Biggest S&P 500 Buybacks
In the fourth quarter of 2023
| Company | Symbol | Q4 2023 buyback ($ millions) | YTD % ch. |
|---|---|---|---|
| Apple | $22,730 | -9.1% | |
| Alphabet | 16,191 | 5.9% | |
| RTX | 10,283 | 11.0% | |
| General Motors | 9,996 | 13.6% | |
| Broadcom | 8,290 | 11.1% | |
| Meta Platforms | 8,165 | 40.1% | |
| Exxon Mobil | 4,656 | 12.2% | |
| Microsoft | 4,000 | 11.4% | |
| Visa | 3,752 | 9.8% | |
| Comcast | 3,521 | -1.9% |
