Share buyback boom remains in overdrive after President Trump’s tax cuts

“The stock buyback boom continued apace in the first-quarter earnings season that is now drawing to a close, with U.S. companies announcing $6.1 billion of buybacks a day, according to Trim Tabs Investment Research,” Ciara Linnane reports for MarketWatch. “That’s second only to the roughly $6.6 billion-a-day announced with fourth-quarter earnings, and is a strong indicator of exactly what companies are planning to do with savings generated by the tax revamp that was signed into law in December, said Trim Tabs.”

“Companies announced new stock buyback programs totaling $183.4 billion in the April to May earnings season, according to the research firm,” Linnane reports, “second only to the $191.4 billion announced in the January to February season.”

“Five companies accounted for 75% of total volume, led by Apple Inc. which announced a $100 billion program,” Linnane reports. “That was followed by Broadcom Inc. with a $12 billion program, Facebook Inc. with $9 billion, Qualcomm Inc. $8.8 billion and T-Mobile US Inc. at $7.5 billion.”

Read more in the full article here.

MacDailyNews Take: To attempt to get a sense of the magnitude of Apple’s buyback plan, it’s comfortably more than double the buyback plans of Broadcom, Facebook, Qualcomm, and T-Mobile combined.

SEE ALSO:
Ralph Nader’s open letter to Apple CEO Tim Cook demands suspension of $100 billion buyback plan; instead wants Apple to pay full year’s pay bonus to Foxconn workers, rec centers across the U.S., and more – May 12, 2018
What Apple’s $100 billion buyback plan says about President Trump’s tax cuts – May 2, 2018
Apple plows U.S. tax cuts into record share buybacks – May 2, 2018
Apple beats Street with best Q2 ever – May 1, 2018
Apple investor focus shifts to capital return plans – March 9, 2018

17 Comments

    1. I’m wondering what happened to the repeated promises that the Big Boys would plow their tax savings into research, infrastructure, and wage increases. It appears that they are just finding ways to increase stock prices without investing in increased productivity. The only folks who expected anything different were just drinking the FlavourAide that a bunch of Jim Jones clones were peddling.

    2. Trump uses iPhones, too. As I recall, many of his tweets and such have been from an iPhone. This is not an issue of who users what brand of devices. This is an issue of the results of the recent tax “reform” which was largely built around massive cuts to the tax rates for U.S. businesses along with a change in how international profits are taxed (can no longer park them overseas to avoid paying taxes).

      Some parts of last year’s tax reform were decent, others were not. Overall, my judgment is that it was an incredibly rushed, chaotic, and partisan effort with lots of flaws and holes remaining. Some of the intent was good, some of it was bad, some of it was an attempt to influence policy (e.g., Obamacare) indirectly because the GOP failed to do it directly. After all, the GOP motto in recent decades seems to b, “When you can’t win outright, then gradually undermine and weaken the opposition.”

      That aside, my biggest objection to the tax reform of 2017 is the fact that the GOP chose to pursue tax cuts through increased deficit spending when we already have a massive debt, large deficits, and historically low unemployment and interest rates. There was no need for fiscal stimulus. It was irresponsible in the extreme, and it shows how far the GOP has strayed from true fiscal conservatism. If you are interested in the likely economic future of this country, then look to the past few decades of GOP Administrations. The massivetax cuts will spark a temporary economic spike followed by a bubble and a severe economic downturn. It happened in 1987. It happened in 2007. And it will happen as a result of the Trump tax cuts in due course. Meanwhile, even more wealth will have been concentrated in the hands of the very wealthy, which is unsustainable and will lead to civil unrest and worse.

      1. Good points.

        How would my post is not misleading? It is true. Trump prefers Android. The State Dept IT guys want him to use an iPhone or other locked down device, and Trump resists because as always he thinks he knows better than anyone else, and he’s always used Android.

        Tax cuts would be nice if they were targeted to drive sustainable economic growth. They are not. Corporate stock buybacks ARE NOT growth, they are designed to enrich the few while avoiding the rewards to all the many people who contribute to the success.

        It’s sad that no trumpians are willing to see what historically happens when poorly designed tax cuts were passed years ago. As there is no longer a sane budget watcher in the entire GOP, the small crumbs the GOP tax bill tossed to the working class are a joke compared to the grand working class benefits that Trump repeatedly promised. It will, however, grow one of the largest peacetime (Oh wait, the GOP wants the USA to be engaged in endless war) deficits in history. Trumpians always point to Obama as a problem because he paid the costs of Bush’s wars and the ill advised financial deregulation passed by the republican congress and signed by Clinton. That was just the last huge deficit bump though — 50 years of stupid budgets is undermining the future for America. The cracks are plainly evident as objectively America is no longer leads the world in practically any healthy metric. As America quickly circles the drain in a race to be the greatest undereducated partisan backstabbing obese entitled opinionated gullible crybabies the world has ever seen, with the most wasteful lifestyles of idleness and drug addition as the infractructure around them crumbles, the nation will be unable to ever pay off its accumulated debts from both corrupt parties. Thank god that Emperor Trump is taking care of multinational corporations so they can buy back shares in their companies and thus further enrich their already obscenely overcompensated executives.

        Thanks for looking out for the common citizen, Emperor Trump. Nero was a better leader.

  1. Stock buybacks are not an efficient way to increase shareholder value. It does, however make a lot of transaction fees for Wall Street- exactly why they like them.

    Look no further than GE. They spent tens of Billions buying back stock under supposed genius Immelt and the stock is worth less, the company is teetering on the verge of bankruptcy and will leave behind underfunded pensions with obligations about equal to the pension deficit they will probably dump onto the back of we the people.

    Tim, spend a few bucks and get us some Mac HW worthy of 2018 that is not a $5,000 throw away.

    1. GE is not even close to bankruptcy and stock buybacks have nothing at all to do with GE’s problems. Some things you know a lot about and some you know nothing about.

      Your comment above reflects the “know nothing” part of your knowledge.

      You know even less about their pension liabilities. I also doubt you have any knowledge of their defined benefit obligations unless you quickly look at the SEC required statements online and then act like you already knew.

      The audience here is incredibly weak when it comes to real business and finance so your bravado usually impresses the droolers that frequent MDN.

      Four votes – two stars for you so far. It’s not going to well for Act I of this script. You should consider a rewrite.

    2. A company like Apple will have worked out the ROI on stock buybacks.
      Overall it reduces their dividend costs whilst increasing the overall value of the remaining stocks.
      With 5B shares outstanding the $200 buyback is about $40 per share or 20% of the current share price.
      If Apple had paid that in a one off dividend then the price of the stock would have been cut by $40. That would give cash in hand but also be a tax issue.
      So on balance, a buyback makes more sense.

      1. It’s always refreshing to see a post where somebody explains their thinking, using logic and factual explanations to back it up.

        You only have to cast a cursory glance at Apple to realise that they analyse opportunities carefully and plan their strategies well in advance. There is no doubt that Apple will have carefully balanced the pros and cons of share buy backs and unlike the armchair CEOs and all the analysts, Apple has detailed figures and considerable practical experience to guide their decision making.

        As far as Wall Street is concerned, Apple doesn’t have much of a track record for doing what Wall Street wants and Wall Street’s support for Apple is capricious and frequently turned into animosity for no logical reason. I think that Apple is wise not to pay too much attention to Wall Street.

        Just look at Wall Street’s perception of Apple over the last ten years or so. Apple has followed a consistent upward trajectory, always meeting or exceeding, frequently hugely exceeding it’s stated growth forecasts, but Wall Street wildly swings in it’s attitude towards Apple. Apple has been reliable and performed impressively, but Wall Street oscillates all over the place in it’s attitude towards Apple.

        1. Apple is the exception because Apple doesn’t play by Wall Street’s rules. Wall Street artificially manipulates AAPL and Apple takes advantages of those buying opportunities.

          Warren Buffet is quite clear about when share buybacks make sense.

          1) The company must have adequate liquidity.
          2) The shares must be selling for less than its “conservatively calculated” intrinsic value.

          Both of those requirements are very clearly met with regard to Apple and it’s buy-backs.

    3. Or how about raising the dividend?

      Buybacks are simply a way for Apple to wrest more control from investors. Dividends continuously reward people for having supported Apple.

      1. I don’t know if it’s legally allowed, or indeed practical to devise such a scheme, but one way to make AAPL less volatile might be to pay a dividend based on shares held for something like 12 month or more. It would benefit long term investors and disadvantage short term speculators.

    4. Assuming a rational market (big assumption!), stock buybacks have a lot of merit. By reducing the number of shares outstanding, stock buybacks should result in a commensurate increase in earnings per share to maintain the same market capitalization. This represents a “paper” transfer of assets from the corporation to the shareholders which is untaxed until the shareholders decide to sell some stock. Unlike the process of receiving and reinvesting dividends, the buyback transfer is untaxed until/unless the shareholder decides to sell. At that point, taxes would be due, of course.

      If a company is strong, then buybacks are generally seen as a reflection of that strength – excess profits (not needed for operations, capital improvements, R&D, or expansion) that are intelligently returned untaxed to the shareholders. Buybacks are also used to offset the dilution resulting from employee stock plans.

      If a company is weak, then buybacks are seen as a desperation move. In those cases, buybacks are unlikely to fool intelligent investors, at least not for long.

  2. That’s great for the poor schmuck who doesn’t own any Apple shares and is too stupid to change the channel off FOX. DOH!

    That tax break really puts a lot of money into the pocket of the WalMart shopper. LOL

  3. Unable to stay on topic, got it.

    “I’m wondering what happened to the repeated promises that the Big Boys would plow their tax savings into research, infrastructure, and wage increases.”

    I’m wondering what happened to your CONSTANT nitpicking of President Donald J. Trump. Alive and well, I read.

    The word you are searching for is incentives. If companies go rogue for greed instead, only you would somehow someway imply the president failed, as in “promises.” All presidents ENGAGE in some form of political cheerleading. News to YOU?

    The president’s passed tax bill is designed for a greater America. No surprise at all you will never understand or acknowledge anything POSITIVE to say about the Don.

    BTW, without your support, wages did increase in many places, people have more money in their pockets, unemployment at record lows including minorities, hiring and business expansion booming, record highs in the stock market, etc.

    Just kills you, FAKE conservative. Good …

    1. I never mentioned Mr. Trump. He’s your obsession, not mine.

      I was referring to all the corporate shills who sold this particular tax bill to Congress and the American people. They promised that the large corporations and wealthy individuals who received most of the benefits would plow their windfall from an unrestricted tax cut back into the economy with productivity investments and higher wages.

      Everybody who didn’t stand to gain personally insisted that the only way to assure that promised outcome was to structure the tax cuts to incentivize appropriate behavior. Warren Buffett, among others, predicted exactly what has happened: without such safeguards, most of the savings are being used for stock buybacks. That steers money that would otherwise go into the US Treasury away from the general public and directly to corporate managers who are mostly compensated with stock and options. That is normal human behavior that Congress chose to ignore.

      The criticism of the tax bill was not partisan. If anything, Republicans were more critical than Democrats of the impact on budget deficits.

      Robber barons don’t need incentives to rob. They do need incentives to invest in the US economy, rather than in themselves. The tax cuts provided no such incentives, and the results are exactly as predicted. It is too early to be cheerleading about longer-range outcomes. Those might turn out as predicted, too.

      1. “I never mentioned Mr. Trump. He’s your obsession, not mine.”

        Ah, no. But you denigrate him every chance you get.

        “I was referring to all the corporate shills who sold this particular tax bill to Congress and the American people.”

        Please provide names and companies of the “shills.”

        “They promised that the large corporations and wealthy individuals who received most of the benefits would plow their windfall from an unrestricted tax cut back into the economy with productivity investments and higher wages.”

        Exactly who promised? Waiting for your list.

        “Warren Buffett, among others, predicted exactly what has happened: without such safeguards, most of the savings are being used for stock buybacks. That steers money that would otherwise go into the US Treasury away from the general public and directly to corporate managers who are mostly compensated with stock and options. That is normal human behavior that Congress chose to ignore.”

        So that would be normal GREEDY business behavior you are OK with?

        “They do need incentives to invest in the US economy, rather than in themselves.”

        Tax cuts ARE incentives!!!

        “The tax cuts provided no such incentives, and the results are exactly as predicted.”

        Bullsh*t! 🐂💩Your predictions are for the president and Republicans to FAIL.

        Nuff said …

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