Stock buybacks are here to stay

Stock buybacks are here to stay

During the 12 months ending June 30, S&P 500 companies have spent a record $1 trillion buying back their own stocks, according to the S&P Dow Jones Indices. But in January, a new 1% tax on buyouts could dampen the appetite of American businesses. S&P Dow Jones estimates the tax would cut corporate profits by half a percentage point at current buyout rates.

The takeovers have recently become controversial, with critics saying there are better uses for corporate money. But an analysis of the 2020 S&P Dow Jones indices of the 100 companies with the biggest buybacks found that their long-term stock returns generally outperformed the S&P 500.

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