Why Buybacks Are Booming On Wall Street
More evidence from the US that companies do not spend tax cuts on paying staff more or boosting jobs. They use the cash from the Trump tax cuts and booming profits to buyback shares at an increasing rate and boost dividends.
According to Howard Silverblatt, S&P Dow Jones Indices senior credit analyst, in the year to the end of March, S&P 500 companies paid out $US428 billion in dividends and bought up $US573 billion of their own shares.
The total of $US1.01 trillion is the first time buybacks and dividends have topped the $US trillion level in the US in a 12 month period. That compares to combined dividends and buybacks worth $US909 billion during the year through March 2017, Silverblatt said in a research note (and $US939 billion over calendar 2017). In a March research note he forecast total buybacks and dividends could reach $US1 trillion in calendar 2018.
Major US companies in the S&P 500 index announced a record $US187.2 billion of buybacks in the first quarter of 2018, lifting the 12-month total to $573.47 billion.
Since March 30, Apple alone has added another$100 billion to the total. The $US428.09 billion of dividends in the year to March 31 was also a new record.
According to the Mr Silverblatt since the beginning of 2013, America’s biggest companies have paid out over $US4.8 trillion in buybacks and dividends.
By way of comparison, that figure tops the $US4.3 trillion the US Federal Reserve spent keeping the US economy alive and on an even keel during and after the GFC a decade ago.
S&P 500 companies also plowed some of the tax cuts windfall into capex investment. March quarter capital expenditures totalled at least $US159 billion, up more than 21% from the year before, according to S&P Dow Jones Indices.
And on wages? Well there was an early flurry of companies that handed out one off bonuses to some staff (Walmart for example), but those payments were qualified by length of service and other restrictions.
By way of contrast, Mr Silverblatt pointed out that 169 S&P 500 members boosted their dividends in the first four months of the year, while no company in the index cut dividend.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.