U.S. corporations have exploded into a stock buyback bonanza in 2024, scooping up their own shares at a pace not seen since 2018. The spending spree reveals companies flush with cash that believes their equities remain attractively valued. During a period of interest rates at levels not seen since 2007 sustained for more than a year , C-suites are eager to prove they can provide shareholder value one way or another.
In the first quarter alone, S&P 500 buybacks totaled a staggering $239 billion—the highest quarterly tally in over six years. Leading financial analysts now predict record repurchase levels topping previous highs within the next year.
What exactly is driving this share-gobbling binge? As companies opt to repurchase stock rather than reinvest profits into growing the business, it signals a belief that shares remain underpriced relative to financial fundamentals and future prospects.
The buyback blowout indicates that despite economic uncertainty, Corporate America feels pretty darn good about itself right now.
While ordinary Americans continue to struggle with decades-high inflation and rising interest rates, C-suite executives have cracked open the bubbly on an epic financial engineering party. Rather than share the wealth through wage gains that boost consumer spending, they are enriching themselves and shareholders.
The numbers reveal companies ramping up stock repurchases by billions of dollars through the first part of 2024:
- Apple Inc. supercharged already massive buybacks, authorizing a record $110 billion stock buyback plan earlier this month. That equals around 4% of the total outstanding shares for the iPhone maker.
Related: Warren Buffett Dumps More Than $84 Billion in Apple Stock - Google parent Alphabet Inc continues its buyback pace from recent years, green-lighting $70 billion more this quarter.
- Meta Platforms Inc. announced a new $50 billion authorization alongside its first-ever stock dividend.
The list of buyback announcements goes on, with FedEx greenlighting $5 billion more, Marathon Petroleum $5 billion, chipmaker Marvell Technology $3 billion, MetLife $3 billion, Genesis Healthcare $3 billion, discount retailer TJX $2.5 billion, and oil transporter ONEOK $2 billion.
Now may present an opportune time for individual investors to examine companies aggressively repurchasing stock. Not only does shrinking the share count typically boost share price, but it signals management’s confidence in continued profit growth.
Of course, corporations can always overpay by buying overvalued equities. If the economy dips into recession, such financial engineering could backfire and erode shareholder value.Vice President Kamala Harris just proposed quadrupling the tax rate on net stock buybacks from 1% to 4% to finance climate initiatives and subsidized childcare.
However, with cash balances still historically high after years of record profits, companies seem intent on funneling funds into shareholder value. That should keep executives and investors happy — while leaving workers behind.
