, have recently unveiled large stock buyback programs, suggesting they are optimistic about their prospects and want to reward shareholders following last year’s pandemic-related uncertainties and lockdowns which forced many firms to conserve cash....
Graham said that companies seeking to buy back shares are optimistic about their near-term prospects and as the economy continues to open up amid rapid vaccinations, more firms will enact buybacks. Although the stock market has recently undergone volatility and traders are worried about inflation, Graham notes that earnings have come in stronger than expected over the past several quarters, meaning it’s the “right time to consider stock buybacks or starting/increasing dividend payouts.”that some larger companies may prefer to repurchase shares – rather than acquire smaller companies due to their high valuations – as an alternative way to increase stockholder value.
S&P 500 buybacks fell by 29% last year to $519.7 billion, driven almost entirely by the smallest companies in the index, Pence said. But year-to-date through May 7 of this year, S&P 500 companies have authorized $504 billion in share repurchases – more than twice the amount authorized by this point last year and the highest total through May in at least 22 years, Pence indicated.Companies are now flush with cash to make stock repurchases – Pence indicated that 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.
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