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All Contents © 2019The Kiplinger Washington Editors
By Dan Burrows, Contributing Writer
| November 9, 2018
If there’s one thing investors have been able to count on during this long bull market, it’s companies repurchasing record amounts of their own stock. Recent volatility notwithstanding, big stock buybacks are a trend that’s expected to continue.
“For the second half of 2018, indications are strong for increased corporate expenditures in both buybacks and dividends, with annual records for both,” wrote Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, in a report summing up buyback activity through the first half of the year. “Buybacks appear to be on a roll, supporting stock price via more purchases and increasing earnings per share through lower share counts.”
Lower corporate tax rates and companies repatriating cash held overseas are helping fuel an acceleration in share repurchase programs, which were already going strong. Indeed, over the past five years, companies in Standard & Poor’s 500-stock index bought back a stunning $2.82 trillion of their own stock, according to S&P Dow Jones Indices.
Although it takes more than share repurchases to support stock prices, they sure do help – and investors generally love them. When it comes to returning cash to shareholders through stock buybacks, these are the most generous companies over the past half-decade.
Data is as of Nov. 7, 2018, unless otherwise noted. Dividend yields are calculated by annualizing the most recent quarterly payout and dividing by the share price. Buyback data is for the five years ended June 30, 2018, courtesy of S&P Dow Jones Indices.
Market value: $167.3 billion
Dividend yield: 2.6%
Stock buybacks, past five years: $38 billion
Citigroup (C, $68.26) has been a major purchaser of its own shares over the past five years as it endeavored to recover from lingering wounds from the financial crisis. Now that the bank is healthy once more, you could say its share repurchases are just getting started.
In a nod to the bank’s strong capital position, the Federal Reserve in June gave Citigroup a green light to buy back up to another $17.6 billion of its own stock during the four quarters starting in the third quarter of 2018. That would represent a major acceleration in returning cash to shareholders. After all, it took Citigroup five years to buy roughly half the amount of stock the bank expects to pick up over the next year.
Market value: $218.0 billion
Dividend yield: 2.8%
Stock buybacks, past five years: $41.7 billion
Cisco Systems (CSCO, $47.90) was generous with share repurchases even before corporate tax cuts. Once the federal government made it less expensive to repatriate earnings held overseas, the technology giant opened up the floodgates.
In February, the company said it would accelerate its share repurchases, fueled with its more than $70 billion in cash held offshore. Cisco announced a $25 billion increase to its existing program in February. For its full fiscal year ended July 28, Cisco returned $23.6 billion to shareholders through share buybacks and dividends.
Cisco has a total authorization of $31 billion in stock buybacks, so investors can expect the repurchases to keep coming.
Market value: $190.0 billion
Dividend yield: 1.5%
Stock buybacks, past five years: $44.1 billion
Oracle (ORCL, $50.26) is another Silicon Valley technology giant that accelerated its share repurchases in response to changes to the corporate tax code. Of the $44.1 billion Oracle has spent on buying back its own stock, nearly $10 billion of that came during the three months ended Aug. 31.
There’s more to come. In September, Oracle’s board of directors raised the company’s stock buyback program by $12 billion. The massive returns of cash to shareholders have helped undergird ORCL stock despite U.S. sales not always living up to Wall Street’s expectations. The software maker’s stock was up 7.8% for the year-to-date ended Nov. 7. The Dow was up 5.5% over the same time frame.
Market value: $374.7 billion
Dividend yield: 2.9%
Stock buybacks, past five years: $45.5 billion
JPMorgan Chase (JPM, $111.48), the nation’s largest bank by assets, also has been one of the biggest buyers of its own stock. Like Citigroup, in some ways the financial firm is just getting started.
A clean financial bill of health from the Fed allowed JPMorgan in June to announce a windfall of cash returns to shareholders. The bank hiked its quarterly dividend by 43% to 80 cents a share from 56 share. As for stock buybacks, the board authorized repurchases of up to $20.7 billion by June 30, 2019. That would represent a jaw-dropping increase over the $45.5 billion in buybacks that the bank has conducted over the past five years.
Market value: $251.3 billion
Dividend yield: 3.2%
Stock buybacks, past five years: $46.8 billion
Wells Fargo & Co. (WFC, $53.58) has suffered a series of setbacks over the past two years stemming from its phony accounts scandal and other black eyes. If there’s a silver lining for shareholders, it’s that WFC has been an aggressive buyer of its own stock – presumably at a discount.
Wells Fargo repurchased nearly $47 billion of its own stock over the past half-decade, and it’s revved up to buy more. With the Fed’s blessing, Wells Fargo announced a 10% dividend hike in June and unveiled a stock buyback plan of up to $24.5 billion, to be executed over the four quarters ending June 2019.
Market value: $859.4 billion
Dividend yield: 1.6%
Stock buybacks, past five years: $60.2 billion
Microsoft (MSFT, $111.96) has been a total-return machine over the past five years. The stock is up 196% on a price basis, according to data from S&P Global Market Intelligence. Add in the dividend, and the total return to shareholders comes to 235%.
MSFT has delivered average annual earnings-per-share growth of 12% over the past five years, according to data from Thomson Reuters, helped by more than $60 billion in stock buybacks. For the three months ended Sept. 30 alone, Microsoft returned $6.1 billion in cash to shareholders through dividends and buybacks, up 27% year-over-year.
Market value: $987.8 billion
Dividend yield: 1.4%
Stock buybacks, past five years: $208.6 billion
It should come as no surprise that the runaway buyback champion is Apple (AAPL, $209.95). The iPhone maker has spent a stunning $208.6 billion on its own stock over the past five years, and it’s still going strong. In the quarter ended Sept. 29 alone, Apple returned more than $23 billion in cash to shareholders through share repurchases and dividends.
Heck, in the past five years, Apple has bought back more of its own stock than Microsoft, Wells Fargo, JPMorgan and Oracle combined. The company said in May that it would buy back another $100 billion in stock, funded by bringing back home much of the $252 billion held overseas.