John Carey, Portfolio Manager
August 30, 2021
The resurgence of U.S. stock buybacks has gotten little media attention. According to J.P. Morgan, stock buyback announcements so far this year total $431 billion, already more than the $307 billion of buybacks for all last year. J.P. Morgan strategist, Dubravko Lakos-Bujas, believes that S&P 500 corporations could buy back $875 billion of their stock over the next year, while paying out another $575 billion in dividends. As shown in Figure 1 (below), these actions total a projected 1.45 trillion dollars which would represent an all-time high. In addition, this would provide investors with an expected shareholder yield of 3.9%, which is three times the current U.S. Treasury 10 Year Note yield-to-maturity of 1.3%.
In our opinion, the resurgence of U.S. stock buybacks will be another catalyst for higher equity prices and will provide support to stock prices in any downturns. More importantly, the projected stock buybacks have not been incorporated into consensus S&P 500 E.P.S. estimates. As a result, we believe S&P 500 E.P.S. estimates are likely to be raised above the current $201.55 and $220 per share consensus projections* for this year and 2022.
*I/B/E/S data by Refinitiv.
All material of opinion reflects the judgement of Adviser at this time and are subject to change. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument or investment advisory services.