Stock Buybacks Are Here to Stay

A new tax on stock buybacks will barely dent a corporate buying spree. But be selective about investing in firms repurchasing shares.

suitcase full of cash
(Image credit: Getty Images)

In the 12 months ending June 30, companies in the S&P 500 index spent a record $1 trillion to buy back their own shares, according to S&P Dow Jones Indices. But come January, a new 1% tax on buybacks might dampen corporate America’s appetite. S&P Dow Jones estimates the tax would reduce corporate profits by half a percentage point at current buyback rates. 

Buybacks have lately become controversial, with critics arguing that there are better uses for corporate cash. But a 2020 S&P Dow Jones Indices analysis of the 100 companies with the biggest buybacks found that their long-term stock returns generally outpaced the S&P 500. 

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In recent years, companies in the S&P 500 index have preferred to return cash to shareholders via share buybacks rather than by paying dividends.
YearShare Buybacks (billions)Dividends (billions)
2022 (through June 30)$501$278
2021882511
2020520483
2019729485
2018806456

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Kim Clark
Senior Associate Editor, Kiplinger's Personal Finance

Kim Clark is a veteran financial journalist who has worked at Fortune, U.S News & World Report and Money magazines. She was part of a team that won a Gerald Loeb award for coverage of elder finances, and she won the Education Writers Association's top magazine investigative prize for exposing insurance agents who used false claims about college financial aid to sell policies. As a Kiplinger Fellow at Ohio State University, she studied delivery of digital news and information. Most recently, she worked as a deputy director of the Education Writers Association, leading the training of higher education journalists around the country. She is also a prize-winning gardener, and in her spare time, picks up litter.