In a groundbreaking speed, American companies are engaging in stock buybacks like never before. As of August, the total value of stock buyback programs announced by US companies this year has reached a record-breaking $983.6 billion, the highest since 1982. Goldman Sachs predicts that the scale of stock buybacks for this year will surpass $1.1 trillion, setting a new historical peak. This not only strengthens the balance sheets of corporations but also fuels the continuous rise of the US stock market.
Leading this wave of buybacks are companies like tech giants Apple and Google’s parent company Alphabet, as well as major banks such as JPMorgan Chase, Bank of America, and Morgan Stanley.
With stock buybacks, companies reduce the number of outstanding shares, consequently enhancing earnings per share. This typically signifies that companies have confidence in their future growth, while also helping to stabilize stock prices in volatile market conditions.
Analysts believe that robust corporate earnings, tax policies aiding companies in accumulating substantial cash reserves, as well as driving stock indices to reach new heights, are the driving forces behind the surge in stock buybacks.
Jeffrey Rubin, President of Birinyi Associates, stated, “The situation is better than what everyone imagined. Corporations are flush with cash. Corporate conditions are quite healthy even before the improvement in profitability.”
Goldman Sachs predicts that this year’s scale of stock buybacks will exceed $1.1 trillion. S&P 500 index component companies have approved $750 billion in buybacks by June 2025, reflecting a 25% increase from 2024.
In May of this year, Apple announced a buyback program of up to $100 billion, Alphabet earlier approved a $70 billion stock buyback program, JPMorgan Chase announced a plan to repurchase $50 billion in July, Bank of America disclosed a $40 billion repurchase program, and Morgan Stanley announced a $20 billion buyback.
However, stock buybacks also face criticism, with detractors pointing out that buybacks may mask slowing profit growth or delay crucial investments. Some analysts note that companies often repurchase stocks when prices are high rather than when they are relatively cheap, which diminishes the efficiency of cash usage.
Despite concerns, stock buybacks remain a powerful tool that can enhance shareholder value and cushion market downturns. Historical data indicates that since 1985, companies with the largest buyback programs have outperformed their peers by an average of 4.52% annually.