Stock buybacks jumped to a record in February, with companies announcing enough repurchases to cover 2 percent of the entire trading value of shares on US exchanges in the month, according to data compiled by TrimTabs Investment Research and Bloomberg.
Companies in the US announced a total of $104.3 bn in repurchase plans last month, the highest level since TrimTabs started tracking the data in 1995, according to a report by Bloomberg. It’s also almost double the $55 bn in repurchase plans announced in February 2013.
The share buybacks, when added to dividend payments, are enough to account for almost all of the combined earnings of all the companies in the S&P 500 Index, the news agency reports.
The 123 companies that announced share buyback plans in the US in February include Home Depot, which said it plans to buy back $18 bn in shares, Comcast, which aims to spend $10 bn on a buyback program, and TJX, which plans to spend $1.9 bn buying back its own stock. Retailer Gap also announced a $1 bn share buyback plan in late February, sending the company’s shares up more than 3 percent on the day of the announcement.
‘Companies that are earning a lot of money and generating cash are borrowing money at basically zero rates and buying back,’ says Neil Grossman, chief investment officer at TKNG Capital Partners, in an interview with Bloomberg News. ‘From an investor’s standpoint, you want the highest return on your dollar, period. If the highest return comes not from growing your business but from buying your shares back, that’s fine.’
State Street Global Advisors, which launched an exchange-traded fund last month that invests solely in US companies known to buy back their own shares, says share buybacks are now the top form of payout from companies in the US, surpassing even dividends. Between 1980 and 2013, the number of dividend-paying companies dropped to 40 percent from 78 percent while the number of companies carrying out buybacks rose to 43 percent from 28 percent, the firm says.
