Stock buybacks are here to stay

In the twelve months ending June 30, Companies in the S&P 500 have spent a record $1 trillion buying back their shares, according to the S&P Dow Jones Indexes. But in January, a new 1% tax on buybacks could dampen corporate US appetite. Standard & Poor’s Dow Jones estimates that the tax will reduce corporate profits by half a percentage point at current repurchase rates.

Buybacks have recently become controversial, with critics arguing that there are better uses for corporate money. But an analysis of the 2020 S&P Dow Jones Indexes 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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