Stock buybacks in the United States appear to be breaking new ground as firms prepare for quarterly earnings season, even as some investors are concerned about the mounting threat of inflation, a potential recession, and stagnant share prices, writes Reuters.
According to financial data firm EPFR, Informa Financial Intelligence, new repurchase announcements by U.S. companies reached over $300 billion in the first quarter, with March showing a high year-over-year increase, suggesting buybacks have remained resilient in recent weeks.
Companies generally repurchase shares when they are optimistic about the future and believe their stock prices are low.
Investors are concerned about the impact of inflation and the prospect of a recession on company outlooks, which could dampen companies' willingness to return money to shareholders in the form of large buybacks and dividends.
JPMorgan (NYSE:JPM) Chief Executive Officer Jamie Dimon said on Monday his bank would reduce its stock buybacks over the next year to meet capital increases required by federal rules. read more
Starbucks Corp (NASDAQ: SBUX) paused billions of dollars of stock buybacks to invest more in employees and stores at a time when the coffee seller faces growing unionization of its U.S. workforce.
According to S&P Dow Jones Indices, S&P 500 companies spent roughly $880 billion last year on stock buybacks, up from $520 billion in 2020. In a recent analysis, Goldman Sachs anticipated that S&P 500 corporations would spend $1 trillion on stock buybacks by 2022, as per Reuters.
Reuters notes that according to Chua, an Informa Financial Intelligence analyst who tracks fresh repurchase announcements, new buybacks announced in March totaled ~$74 billion, up from $54 billion in March 2021.
