Interview, Fireside Chat
The Return of Stock Buybacks
- Share repurchase authorizations fell approximately 45% last year to roughly $508 billion, a pace not observed since 2012, while actual spending declined 27% to about $600 billion, matching 2016 and 2017 levels.
- Approximately 20% of S&P 500 companies publicly terminated or suspended repurchase programs last year, with an additional estimated 20% suspending them without announcement, including financial institutions barred from buying stock during quarterly stress tests.
- Authorizations in 2021 have reached approximately $180 billion, representing a 60% year-over-year increase, with financials comprising about 30% of the total following regulatory approval for large banks.
- Total repurchase authorizations for the U.S. market in 2021 are estimated at $800 billion, which would rank as a top-five historical high, though the current aggressive pace is not considered sustainable through the remainder of the year.
- Actual dollars spent by S&P 500 companies in 2021 are projected to rise by approximately 15%, supported by cash equivalents near historic highs of $1.9 trillion and roughly $200 billion in unused authorizations rolling over from the previous year.
- Concentration remains high, with the top five repurchasers accounting for 40% of total dollars and the top 25 responsible for almost 80% of activity.
- Market drivers include companies prioritizing balance sheet strength, low interest rates reducing the return on cash, dilution concerns during rising stock prices, and the reemergence of U.S. corporates as net equity buyers after a hiatus last year.
- Historical parallels suggest potential for activity similar to 2018, when tax reform coincided with $1.1 trillion in authorizations, as focus shifts from the pandemic to potential future tax reforms.
- A confluence of conditions increases the likelihood that share repurchases will re-enter the political debate, though historically U.S. corporations have demonstrated a willingness to aggressively buy equities during market dislocations, providing meaningful support to broader markets.