• / Free eNewsletters & Magazine
  • / My Account
Home>S&P 500 buybacks have dropped by 25% since the first quarter of 2016

S&P 500 buybacks have dropped by 25% since the first quarter of 2016

S&P 500 buybacks have dropped by 25% since the first quarter of 2016

09/18/2017

By Ryan Vlastelica

Part of the slowdown is due to Apple

It isn't just investors who are doing less trading these days (http://www.marketwatch.com/story/etf-volumes-go-near-mute-levels-as-volatility-drops-to-near-record-lows-2017-08-04): companies seem to be as well, and have been dramatically pulling back on the amount of their own shares that they purchase.

Buybacks for companies in the S&P 500 index have been steadily dropping and reached $120.1 billion in the second quarter, according to preliminary data from S&P Dow Jones Indices. That's down 9.8% from the first quarter of 2017, and off 5.8% from the year-ago period, when companies repurchased $127.5 billion of their own stock.

Compared with the first quarter of 2016, the last time the stock market saw a pronounced pullback in prices, buybacks have slowed by more than 25%, per S&P's data.

The lower buyback activity in the quarter came "as share prices increased, resulting in fewer share repurchases and a weaker tailwind for [earnings per share]," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Corporate profits are measured in earnings per share, or the amount of profit they make divided by their shares outstanding. Reducing the number of shares outstanding through buybacks is a way to boost this metric, aside from organic earnings growth.

About 13.8% of S&P 500 issues "substantially" reduced their year-over-year share out in the second quarter, compared with 26.6% in the second quarter of 2016, as well as the 14.8% that did in the first quarter of this year. Sixty-six issues in the S&P reduced their share count by at least 4%, a level that is seen as having an impact on EPS, down from 134 in the year-ago period and 71 in the first quarter of 2017.

©2017 Morningstar Advisor. All right reserved.