According to a recent report by S&P Dow Jones Indices, companies in the S&P 500 index bought a record $881.7 billion of their shares in 2021, up 70% from $519.8 billion in 2020.
The previous record was $804.6 billion in 2018.
“Current indications are that companies have maintained their buybacks during the recent downturn, meaning they will get more shares for their spending and reduce the number of shares even further, resulting in higher [earnings per share]said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
He added: “Given the strong base purchases, revenue forecast even with a potential consumer slowdown and lower margins, buybacks could set a new record in 2022.”
Big Tech is one of the most popular sectors for share buybacks. It is followed by companies in the financial, energy and communications services sectors.
( is considered the poster child for share buybacks. In 2021 alone, the iPhone maker spent $88.3 billion on buybacks, up from $81.5 billion in 2020. AAPL)
To buy back shares, the Cupertino, California-based tech giant has spent $360.2 billion in five years and $510.7 billion in 10 years. Had the tax been introduced, Apple would have paid just over $5 billion in additional taxes to the IRS.
The top five companies that bought their shares the most in 2021 included four technology companies and one bank – Bank of America.
In addition to Apple, Meta Platforms
( (Facebook, Instagram and WhatsApp), Alphabet META) ( and Microsoft GOOGL) ( are among the major users of share buybacks. MSFT)
Much of the compensation in technology is stock-based, including options, performance stocks and restricted stock. That is non-cash wages offered to employees. By raising their stock prices, tech companies hope to retain talent.
Good or bad for the pay?
Share buybacks, also known as share buybacks, is one of the ways a company shares its financial success with shareholders.
In a buyback, as the name suggests, a company buys its own shares in the market. Such movements reduce the outstanding shares of the company and increase the proportionate interests of the shareholders.
Unlike dividends, share buybacks increase earnings per share by reducing the number of shares. They also allow investors to defer or avoid paying taxes.
If the new tax is generally not well received in corporate circles, voices have risen to support it, including entrepreneur Mark Cuban.
“I think a buyback tax is actually a good idea,” the billionaire told CNBC in a phone interview on Aug. 11. 2%.
Cuban says share buybacks reward shareholders who want to sell all or part of their holdings: “It’s a response to pressure from major investors, to CSuite looking to develop EPS [earnings per share]trying to get hold of the stock, to get bonuses,” the billionaire burst out.
Among the critics of buybacks are Sens. Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont).
Jesse Fried, a Harvard Law School professor and corporate governance expert, says stock buybacks are necessary for greater equity in corporate wages.
“Taxes are based on a misunderstanding of capital flows and will have harmful effects, especially if the buyback-hating Congress raises rates once the tax mechanism is in place,” Fried warns.
He adds, “Redemptions are part of the stock issuance cycle. If you like stock payments, like me, you need redemptions.”