Stock Buybacks Are Here to Stay

In the 12 months ended 30 June, companies in the S&P 500 index spent a record $1 trillion to buy back their own shares, according to S&P Dow Jones Indices. But come January, a new 1% tax on buybacks could dampen corporate America’s appetite. S&P Dow Jones estimates the tax would cut corporate profits by half a percentage point at current purchase rates.

Buybacks have recently become controversial, with critics arguing that there are better uses for corporate cash. But a 2020 S&P Dow Jones Indices analysis of the 100 companies with the largest buybacks found that their long-term stock returns generally outperformed the S&P 500.


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