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Stock buybacks — when a company repurchases its shares on the open market to increase value of the stock — surged by 36.5% in the first quarter of 2021 from the fourth quarter, S&P Dow Jones Indices said in a report, nearing pre-Covid levels of activity and suggesting more companies are optimistic about their near-term prospects.
Specifically, companies in the S&P 500 index repurchased $178.1 billion of shares in the first quarter of 2021, a 36.5% jump from the fourth quarter of 2020 figure of $130.5 billion, and double the figure recorded in the pandemic low of $88.7 billion in the second quarter of last year.
Year-over-year from the first quarter of 2020 (just prior to the onset of the pandemic), buybacks were down 10.4% from $198.7 billion.
For the 12-month period ended March 2021, share buybacks dropped by 30.8% to $499.1 billion from $721.6 billion recorded in the 12-month period ended March 2020.
The number of companies making significant buybacks is accelerating — 335 firms repurchased at least $5 million in the first quarter of 2021, up from 244 in fourth quarter 2020, 190 in third quarter 2020, 170 in second quarter 2020, but still down from 373 in first quarter 2020.
"Companies almost fully returned to the buyback market in [first quarter 2021] after their [second quarter 2020] Covid-inspired departure… Given the strong and expected record level cash-flow from [first quarter 2021], the full return to pre-Covid levels is expected later in the year," stated Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.S&P said the information technology sector – led by such stalwarts as Apple, Microsoft and Google parent Alphabet – dominated buybacks, accounting for 31.6% of all repurchases in first quarter 2021, or about $56.4 billion in total, although that figure fell short of the $59.1 billion tech spent on buybacks in first quarter 2020. In first quarter of 2021, by sector, the next biggest spenders were financial stocks (19.9% of all buybacks) and health care (11.4%). Apple was the largest individual stock repurchaser in the first quarter of 2021, buying back $18.8 billion; followed by Alphabet ($11.4 billion); Microsoft ($6.9 billion.); and Berkshire Hathaway ($6.6 billion). Andrew Graham, managing partner at Jackson Square Capital, told Forbes that many companies had cancelled stock buyback plans last year during the Covid lockdowns due to uncertainties, but now feel more comfortable about increasing shareholder returns through stock buybacks. U.S. companies now have massive cash reserves to deploy. Dryden Pence, chief investment officer of Pence Wealth Management, told Forbes S&P 500 companies held $1.9 trillion in cash at the end of 2020 – the highest level ever — and up nearly $400 billion compared to 2019.
S&P said it expects the pace of stock repurchases to keep increasing this year as the big banks re-enter the buyback market, having been given the green light to do so by the Federal Reserve late last year. S&P added that more companies will likely expand their buybacks in order to reduce share count and increase their earnings-per-share figures.
$319.2 billion. That’s how much Apple has spent on share buybacks over the past five years, a period in which its stock price has almost quintupled in value.
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