Calendar Year S&P 500 Stock Buybacks

Learn more about this firm

Calendar Year S&P 500 Stock Buybacks

 

Stock buybacks buoy equity markets. Low rates buoy buybacks.

Data from Bloomberg indicate that the $759 billion that S&P 500 companies spent on stock buybacks in 2018 was the largest dollar amount this century. In early 2019, stock buybacks continue to make headlines, with more than 35 companies having already made new authorizations for nearly $140 billion in buybacks.

A comparison of buybacks over the last eight years to buybacks during the eight years prior to the crisis offers some interesting insights.

In the eight years prior to the financial crisis, not only did fewer companies execute buybacks, but the average buyback was also smaller in size, even on a buyback yield basis (buyback amount/market cap).

Perhaps the most interesting aspect is the difference between the interest rates during those years. The average 5-yr Treasury yield in the earlier period was 4.2% and just 1.6% in the later period.

To the extent that companies are financing their buybacks with debt, today’s lower rates are likely to continue to fuel the current buyback trend. In the meantime, investors may do well to consider what will replace buybacks’ buoying effect on equity markets when rates eventually move higher.


Unless otherwise noted, data is sourced from Bloomberg.
Recipients must make their own independent decisions regarding any strategies or securities or financial instruments mentioned herein.
The products or services described or referenced herein may not be suitable or appropriate for the recipient. Many of the products and services described or referenced herein involve significant risks, and the recipient should not make any decision or enter into any transaction unless the recipient has fully understood all such risks and has independently determined that such decisions or transactions are appropriate for the recipient.
The results shown are historical, for informational purposes only, and do not guarantee future results.
Any discussion of risks contained herein with respect to any product or service should not be considered a disclosure of all risks or a complete discussion of the risks involved.
The recipient should not construe any of the material contained herein as investment, hedging, trading, legal, regulatory, tax, accounting or other advice. The recipient should not act on any information in this document without consulting its investment, hedging, trading, legal, regulatory, tax, accounting and other advisors.
The materials in this document represent the opinion of the authors and are not representative of the views of Milliman, Inc. Milliman does not certify the information, nor does it guarantee the accuracy and completeness of such information. Use of such information is voluntary and should not be relied upon unless an independent review of its accuracy and completeness has been performed. Materials may not be reproduced without the express consent of Milliman.
Data included in this document has been sourced from providers that Milliman FRM believes to be reliable from information available publicly or with consent of the provider of the source material. To the fullest extent permitted by law, no representation or warranty, express or implied is made by Milliman FRM as to the accuracy or completeness of the source data or any other information in this document.

© Milliman FRM

More S&P 500 Topics >

Learn more about this firm