Thanks in part to President Donald Trump’s tax reform which cut the corporate tax rate to 21% from 35%, companies listed in the S&P 500 Index boosted stock buybacks, setting a new record for the group.
Citing data from S&P Dow Jones Indices, Barron’s reported that S&P 500 companies bought back $189.1 billion of shares during the first three months of the year. The amount surpassed the old record hit in the third quarter of 2007 by close to 10%, noted Barron’s. (See more: Execs Profiting From Record Buybacks: SEC Official.)
S&P Buybacks Among Top Companies
While stock buybacks are welcomed by shareholders, S&P Dow Jones Indices senior index analyst Howard Silverblatt said that twenty companies in the index accounted for close to half of the stock buybacks with Apple Inc. (AAPL) leading the charge. According to Barron’s, tech companies represented one-third of all the share repurchases during the first quarter coming in at $63.4 billion. Meanwhile, the healthcare industry accounted for $35.6 billion in stock buybacks, landing in second place. Financial companies in the S&P Index came in third place with cumulative share repurchases of $33.8 billion. Apple accounted for $22.8 billion, surpassing its past record of $18 billion in stock buybacks in 2014, noted the report. Apple had the largest quarterly volume of share buybacks for a company in the S&P 500 index ever. Amgen (AMGN), Cisco Systems (CSCO), Pfizer (PFE) and Bank of America (BAC) were also big buyers of their own shares during the first quarter. (See more: Apple Gears Up to Spend All Its Cash.)
Apple Signaled Aggressive Buybacks
When reporting second-quarter results in May, Apple announced plans to buy back $100 billion in shares and said it would raise its dividend 16% to $0.73 per share. The company has a massive amount of cash, standing at $267.2 billion as of the end of the March quarter. Before President Trump signed tax reform into law much of that cash was held overseas and would have been repatriated at a high tax rate. But tax reform gives companies a break and thus the record stock buyback program. In February, speaking during a conference call to discuss fiscal first-quarter results with Wall Street, Apple Chief Financial Officer Luca Maestri said that given the increased “financial and operational flexibility” to its cash held overseas, “we are targeting to become approximately net cash neutral over time.”