Amid rising political uproar against buybacks, corporate America is stepping up its shopping spree.
Six weeks into the year, U.S. companies have announced plans to repurchase $140 billion of their own stock, up 28 percent from a year ago, according to data compiled by Birinyi Associates Inc.
While the pace trails the 58 percent increase for all of 2018, it’s more than double the average rate seen during the past five years.
Buybacks are picking up from a record pace after tax cuts boosted profits and cash piles grew. Last year, authorizations topped $1 trillion for the first time since Birinyi began tracking the data in 1984.
The buying spree is under growing attack as politicians are focusing on corporate governance as an election issue. Senator Marco Rubio (R-Fla.) on Tuesday announced a plan to tax buybacks on equal footing with dividends. A few days ago, Senate Minority Leader Chuck Schumer (D-N.Y.) and Senator Bernie Sanders (I-Vt.) said they’ll introduce legislation barring companies from buying back their own stock unless they first increase workers’ pay and benefits.
“In many cases, growth in revenue has been hard to achieve, companies don’t have a need for additional productive capacity, so a sensible thing to do in that case is invest in the company itself,” Peter Jankovskis, co-chief investment officer at Oakbrook Investments, said by phone. “Unless there is a bill passed, it’s going to become law, I don’t expect companies to be changing their behavior.”
© Copyright 2024 Bloomberg News. All rights reserved.