Economic recovery powers a boom in share buybacks
After better-than-expected first-quarter results, US firms are buying back their own shares at the fastest rate in over 20 years.
“We’re buying back stock because our cup runneth over,” JPMorgan Chase’s chief executive Jamie Dimon told investors last month, before announcing a “$30bn share-repurchase plan”, says Caitlin McCabe in The Wall Street Journal. The bank is not unusual. After slashing payouts to preserve cash last year, many blue-chips are swimming in greenbacks. The money is now heading for “shareholders’ pockets”. US firms have already announced $504bn of share buybacks so far this year. That is the fastest pace “in at least 22 years”. The first quarter also brought the fastest quarterly rise in dividend payouts since 2012.
The buyback surge is being powered by “blowout first-quarter” results on both sides of the Atlantic, say Aziza Kasumov and Siddharth Venkataramakrishnan in the Financial Times. Firms in the Stoxx Europe 600 index are on course to achieve year-on-year earnings growth of 90%.
Share repurchases are attractive to companies that are flush with cash, but uncertain about the future. Dividend hikes can be difficult to reverse if business conditions worsen. Buybacks, by contrast, can be used “more opportunistically” when a firm has cash to spare.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The FTSE is enjoying its own “buyback bonanza”, says Jim Armitage in the Evening Standard. Big UK firms have announced more than £8bn in buybacks so far this year, according to data from AJ Bell. In theory, this should deliver capital gains to shareholders, but that’s not guaranteed: BP is “a buyback champion”, but you wouldn’t think so from its share price recently. That’s why critics see buybacks as “financial engineering”. When management can think of nothing better to do with extra cash than to buy the company’s own shares, it can be a sign that a firm is operating in a “boring, low-growth industry”.
-
Stop inheritance tax perk on pensions, says IFS
The government could raise billions of pounds in revenue by closing inheritance tax loopholes, such as on pensions and AIM shares. Is your pension at risk?
By Ruth Emery Published
-
Revealed: Best buy-to-let property hotspots in the UK
Looking for the best buy-to-let property locations in the UK? We reveal the top 10 postcodes with the strongest rental returns
By Oojal Dhanjal Published
-
AstraZeneca CEO’s £1.8mn pay rise approved despite shareholder opposition
AstraZeneca hiked its dividend to persuade shareholders to accept CEO Pascal Soriot’s pay rise. Is he worth his salary?
By Dr Matthew Partridge Published
-
Adidas, Nike or Jordans - could collectable trainers make you rich?
The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
By Chris Carter Published
-
The industry at the heart of global technology
The semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
By Rupert Hargreaves Published
-
Three emerging Asian markets to invest in
Professional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
By Chetan Sehgal Published
-
What to consider before investing in small-cap indexes
Small-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
By Cris Sholto Heaton Published
-
Why space investments are the way to go for investors
Space investments will change our world beyond recognition, UK investors should take note
By Merryn Somerset Webb Published
-
Time to tap into Africa’s mobile money boom
Favourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
By Rupert Hargreaves Published
-
M&S is back in fashion: but how long can this success last?
M&S has exceeded expectations in the past few years, but can it keep up the momentum?
By Rupert Hargreaves Published