Apple continues to lead, spending $17.6 billion – down from last quarter’s $18.2 billion, yet still the 8th highest expenditure ever.
S&P Dow Jones Indices announced today that preliminary Q3 2019 S&P 500 stock buybacks, or share repurchases, were $175.9 billion – a 6.3% increase over Q2 2019’s $165.5 billion. This was the first increase after two consecutive quarters of declines since the record $223 billion in Q4 2018.
• Companies reversed declines in buyback expenditures in the past two quarters of this year, posting a 6.3% gain over Q2 2019, as the current level remains significantly higher than 2017 and prior periods. The cumulative rolling four quarters of repurchases continued to impact EPS, as 22.8% of the issues reduced share counts by at least 4% year-over-year, the same level as Q2 2019, but up from the Q3 2018’s 17.7%. Over 1-in-5 issues saw at least a 4% EPS tailwind and at this point 14.6% of the issues already have at least a 4% tailwind built into Q4 2019.
• S&P 500 Q3 2019 dividends set a quarterly record, increasing to $123.2 billion, up 6.4% from the Q3 2018 $115.7 billion; Q4 2019 is set to post yet another record, in the $126 billion range.
• Total shareholder return of buybacks and dividends for the quarter came in at $299.0 billion, up 5.2% from the Q2 2019 period expenditure of $284.1 billion and down 6.4% from the $319.5 billion reported for Q3 2018.
• Total shareholder return for the 12-month period ending September 2019 declined to $1.249 trillion from the 12-month June 2019 level of $1.270 trillion, and was up 7.1% from the year-over-year 12-month Q2 2018 level of $1.166 trillion.
“After lowering expenditures in the first half of the year from their tax-inspired record-setting buying spree of 2018, companies increased their share repurchases by 6.3% in the third quarter,” said Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, in a statement. “While the levels still pale in comparison to 2018, they are significantly higher than the pre-2018 levels, and surpass the hoped for $170 billion mark, which was seen as the level needed to support stocks and continue reduced share count EPS growth. For Q4, the market is looking for another increase in buybacks, in the mid-single digit range, staying near the $190 billion level, well shy of the Q4 2018 record-setting $223 billion.”
Silverblatt also found that buybacks continue to be top heavy, with the top 20 issues accounting for 50.4% of the buybacks, compared to the 10-year average of 44.5%.
Q3 2019 GICS Sector Analysis:
Information Technology buybacks continued to decline as a percentage of all buybacks, as they decreased 10.8% to $49.2 billion compared to $55.2 billion for Q2 2019. Twelve-month expenditures were down 7.6% to $233.7 billion from the $253.0 billion spent in the same period in 2018. The sector represents 28.0% of the index’s buybacks, down from Q2 2019’s 33.4% and 40.4% in Q3 2018.
Financials were right behind Information Technology for expenditures, as they increased 26.4% to $47.8 billion, up from last quarter’s $37.8 billion. They represented 27.2% of all buybacks, up from 22.9% in Q2 2019, and are less than one percentage point away from Information Technology’s 28.0%.
Materials buybacks continued to be volatile, as they increased 123.1% after declining 49.3% last quarter, spending $5.4 billion on buybacks, up from $2.4 billion last quarter and down from $4.8 billion for Q1 2019. Utilities again declined, spending 11.1% less, to $0.8 billion from last quarter’s $0.9 billion and $1.5 billion in Q1 2019.
Health Care buybacks declined 6.2%, to $16.0 billion, from last quarter’s $17.1 billion, as they represent 9.1% of all buybacks, down from last quarter’s 10.3%.
The five issues with the highest total buybacks for Q3 2019 are:
• Apple (AAPL) continued to lead in buybacks, spending $17.6 billion in Q3 2019, ranking 8th in S&P 500 history, as the level was down 2.9% from their Q2 2019 $18.2 billion expenditure. Over the past 12-months, Apple has spent $69.7 billion on buybacks, down from $75.3 billion in the prior 12-month period. Over the five-year period they have spent $247.8 billion, more than the market value of Home Depot.
• Bank of America (BAC): $7.6 billion for Q3 2019, up from $6.5 billion for Q2 2019; in the last 12-months they spent $25.6 billion, up from $19.7 billion.
• Wells Fargo (WFC): $7.5 billion for Q3 2019, up from their $4.9 billion Q2 2019 expenditure; in the last 12 months they spent $24.7 billion, up from $16.5 billion.
• JP Morgan (JPM): $6.9 billion for Q3 2019, up from the $5.2 billion spent in Q2 2019; in the last 12-months they spent $23.2 billion, up from $18.9 billion.
• Alphabet (GOOG/L): $5.7 billion for Q3 2019, up from $3.6 billion for Q2 2019; in the last 12-months they spent $14.9 billion, up from $8.5 billion.
Source: S&P Dow Jones Indices
MacDailyNews Take: ‘Twas U.S. tax reform that spurred those record buybacks in 2018.
You know, this is a funny story… In 2012, I’d been in the CEO spot maybe a year or so. We had a growing amount of cash. I think we had just crossed the $100 billion mark, if my memory is correct. And I was getting lots of input from a lot of different people, as you can guess.
And when I don’t have experience in something, I always make a list of the people that I think are the smartest people that I can contact to talk to them and get advice. And Warren [Buffett] was on the top of the list. As you can imagine, I’d never met Warren before. And so I get his number. I call out into Omaha. And I’m think — I wasn’t sure he’d take the call. You know, I’m just sort of calling outta the blue. He doesn’t know me from Adam. But he took the call, and I had a great conversation with him. And that was the first time that I’d met Warren.
And he was very clear to me. I still remember it. He said… “Let me just cut through it. If you believe your stock is undervalued, you should buy your stock.” And I thought that was just the simplest way of looking at it. So here’s what we do is, we first and foremost take care of our people, and we take care of the company and the future of the company. And we’ve been investing a ton in both this country and some others.
We’re gonna spend $350 billion in the United States in building new sites. And we’ve just got the new expansion in Austin and so forth. So all of that is number one, right? And then if we have money leftover, we look to see what else we do. We acquire everything that we need that can fit and has a strategic purpose to it. And so we acquire a company on average, every two to three weeks…
We’re fortunate in that, when we buy our stock [back] we think that almost 50% of U.S. households own Apple stock, either directly or indirectly through indexes and mutual funds and so forth. And so it helps everybody or helps a large number of people. — Tim Cook, May 2019