Wednesday, December 21, 2016

Buybacks on the Decline

S&P 500 firms repurchased $115.6 billion worth of their own stock in the third quarter of this year, down 28 percent from the same quarter a year earlier, according to FactSet. That’s the largest year-over-year decline since 2009, and follows on the heels of a sharp drop-off in the second quarter as well.

Buybacks fell across the S&P sectors that typically buy back the most shares, such as information technology and financials. Tech firms did remain the biggest buyers, accounting for $27 billion worth of buybacks, but that represents a drop of more than 40 percent. Financials came in second, purchasing $25 billion.

Why has this been happening? One theory is that companies are too nervous about the economic outlook to spend heavily on buyback programs, especially at a time when their valuations were climbing and buybacks were getting more costly.

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