S&P 500 Buyback Index


DEFINITION of 'S&P 500 Buyback Index'

An index designed to track the performance of the 100 S&P 500 stocks with the highest buyback ratios over the past 12 months. The S&P 500 Buyback Index is equal-weighted and rebalanced quarterly, with the rebalancing reference dates occurring on the last trading day of each calendar quarter. Index changes are effective after market close on the third Friday of the month after the reference date.

BREAKING DOWN 'S&P 500 Buyback Index'

The S&P 500 Buyback Index ranks the S&P 500 members in descending order of their buyback ratios every quarter, and includes the top 100 in the Buyback Index. The Index gives investors an avenue to invest in companies that are aggressively buying back their own shares. A share buyback is a compelling route for a company to generate value for its shareholders, since a buyback contracts share float, improving per-share measures of profitability and cash flow like EPS and CFPS.  

In 2013, share buybacks increased to multi-year highs as companies were flush with cash on account of record earnings and the ability to borrow at interest rates near historic lows. As of December 2013, the biggest sector contributors to the S&P 500 Buyback Index were consumer discretionary (22%), information technology (19%), financials (18.5%) and health care (15.5%). These four sectors together constituted three-fourths of the Buyback index.

The positive reception by investors to share buybacks can be gauged by the outperformance of the S&P 500 Buyback Index, compared to the S&P 500. 

  1. Investment Company Act Of 1940

    Created in 1940 through an act of Congress, this piece of legislation ...
  2. Leveraged Buyback

    A repurchase of significant amount of shares through the use ...
  3. Expanded Share Buyback

    An increase in a company’s existing share repurchase plan. An ...
  4. Retail Repurchase Agreement

    An alternative to regular savings deposits. Under a retail repurchase ...
  5. Term Repurchase Agreement

    Under a term repurchase agreement, a bank will agree to buy securities ...
  6. Accelerated Share Repurchase - ...

    A specific method by which corporations can repurchase outstanding ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Fundamental Analysis

    Analyzing Investments With Solvency Ratios

    Solvency ratios are extremely useful in helping analyze a firm’s ability to meet its long-term obligations; but like most financial ratios, they must be used in the context of an overall company ...
  3. Investing Basics

    Logic: The Antidote To Emotional Investing

    Playing follow-the-leader in investing can quickly become a dangerous game. Learn how to invest independently and still come out on top.
  4. Investing Basics

    Impact of Share Repurchases

    Share repurchases can have a significant positive impact on an investor’s portfolio and are a great way to build investor wealth over time.
  5. Investing Basics

    Warding Off Hostile Takeovers

    The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic information ...
  6. Markets

    How Buybacks Warp The Price-To-Book Ratio

    Relying on price-to-book can get ugly if a company has repurchased stock. Learn why.
  7. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  8. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  9. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  10. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  1. What is an odd-lot buyback?

    An odd-lot buyback occurs when a company offers to purchase shares of its stock back from people who hold less than 100 ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  4. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  5. How does the stock market react to changes in the Federal Funds Rate?

    The stock market reacts to changes in the federal funds rate in various ways depending on where it is in the business cycle. ... Read Full Answer >>
  6. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  2. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  3. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  4. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  5. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  6. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
Trading Center