Share Buybacks Surge: A New Wave of Corporate Cash Deployment
Monday, Jan 13, 2025 3:13 am ET
3min read As the global economy continues to recover from the COVID-19 pandemic, corporations are once again turning to share buybacks as a means of deploying their excess cash. In the first quarter of 2025, U.S. companies announced a record $431 billion in buyback programs, surpassing the $307 billion total for the entire year of 2020. This trend is expected to continue, with J.P. Morgan strategist Dubravko Lakos-Bujas predicting that the rolling 12-month total could reach a new record of $1 trillion.
Historically, tech companies and banks have been the primary drivers of share buybacks. In 2025, Apple Inc. (AAPL) and Bank of America (BAC) have already announced buyback programs totaling $90 billion and $25 billion, respectively. Additionally, Alphabet Inc. (GOOGL) has announced a $50 billion buyback, indicating that communication services companies are also joining the trend. In total, S&P 500 corporations are expected to buy back $875 billion of their stock and pay out another $575 billion in dividends over the next year, providing investors with an expected shareholder yield of 3.9%.
The low interest rate environment and solid economic growth make share buybacks an attractive option for corporations. Christopher Harvey, U.S. equity strategist at Wells Fargo Securities, notes that borrowing costs for many S&P 500 companies are nearly as low as those for the U.S. government, making debt-funded buybacks an appealing strategy.
To identify companies that could be set for a buyback surge, Harvey screened for firms that were active buyers of shares in 2018 and 2019, saw a significant drop in buyback activity in 2020, and have large cash balances. Some of the companies that made the list include Newell Brands (NWL), Discover Financial Services (DFS), Cisco Systems (CSCO), Textron (TXT), and Amgen (AMGN).
In conclusion, the surge in share buyback programs indicates that corporations are confident in their financial health and future prospects. As the global economy continues to recover, investors can expect to see more companies deploying their excess cash through share buybacks, potentially boosting stock prices and providing a positive signal for the market. However, it is essential for companies to carefully consider the potential risks and benefits of share buyback programs before implementing them.
Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.
