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Buyback ETFs Could Enjoy Record Year of Company Share Repurchases

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This article was originally published on ETFTrends.com.

Company stock repurchases just hit its fourth consecutive quarterly record, the longest streak in at least two decades. Investors can also look to exchange traded funds that focus on the buyback strategy if the pace of repurchases continues.

The S&P Dow Jones Indices announced preliminary Q4 2018 S&P 500 stock buyback numbers of $223 billion, which marked the fourth consecutive quarterly record, the longest streak in the 20 years SPDJI has been tracking buybacks. The previous record of $203.8 billion was set during Q3 2018 and the Q4 number was a 62.6% jump from the $137.0 billion reported for Q4 2017.

For all of 2018, buybacks set a record $806.4 billion, or up 55.3% year-over-year and up 36.9% from the record $589.1 billion set back in 2007.

“Buybacks broadened out in Q4, as the top 20 issues accounted for 44.4% of all S&P 500 buybacks, near the recent historical average of 43.7%, down from Q3’s 54.3%, Q2’s 49.7% and Q1’s 49.5%. For the year, however, the top 20 accounted for 42.2% of the buybacks, substantially up from 2017’s 32.3%," Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, said in a note.

The record buybacks came in while stock prices declining an average 5.3% over Q4 2018, which only further increased the number of shares that companies could repurchase for the same amount of capital. Consequently, the percentage of companies that substantially cut share counts of at least 4% year-over-year surged to 18.8%, compared to the prior quarter’s 17.7% and Q4 2017’s 15.1%, bolstering earnings-per-share results.

“Buybacks were again favored over dividends in both the rate of growth and aggregate dollars spent,” Silverblatt added. “Companies continued to spend more of their tax savings on these share repurchases as they boosted earnings through significantly reduced share counts. Adding to the share reduction, and therefore the EPS impact, was Q4’s stock price decline, which permitted companies to buy even more shares for their dollars and reduce share count more efficiently.”

Company

Ticker

Sector

Q4 2018

2018

2017

5-Year

10-Year

Indicated

Buybacks

Buybacks

Buybacks

Buybacks

Buybacks

Dividend

$ Million

$ Million

$ Million

$ Million

$ Million

$ Million

Apple

AAPL

Information Technology

$10,114

$74,246

$34,427

$228,961

$260,449

$13,769

Oracle

ORCL

Information Technology

$9,995

$29,306

$3,975

$58,680

$88,482

$3,445

Wells Fargo

WFC

Financials

$7,308

$20,964

$10,301

$57,986

$71,610

$8,189

Microsoft

MSFT

Information Technology

$6,413

$16,300

$8,405

$66,093

$118,506

$14,117

Merck

MRK

Health Care

$5,933

$9,091

$4,014

$28,428

$43,774

$5,679

JPMorgan

JPM

Financials

$5,928

$19,983

$15,410

$54,851

$73,155

$10,478

Bank of America

BAC

Financials

$5,231

$20,094

$12,814

$42,069

$45,307

$5,795

Cisco Systems

CSCO

Information Technology

$5,182

$22,936

$7,771

$46,276

$81,820

$6,163

Starbucks

SBUX

Consumer Discretionary

$5,170

$10,709

$3,306

$18,828

$21,114

$1,791

Pfizer

PFE

Health Care

$5,030

$12,198

$5,000

$32,035

$64,476

$7,995

Home Depot

HD

Consumer Discretionary

$4,445

$9,963

$8,000

$38,843

$57,619

$6,145

Citigroup

C

Financials

$4,206

$14,533

$14,946

$46,705

$50,090

$4,233

Facebook

FB

Communication Services

$4,045

$16,087

$5,222

$21,388

$25,140

$0

Johnson & Johnson

JNJ

Health Care

$3,808

$5,868

$6,358

$33,697

$62,014

$9,587

Broadcom

AVGO

Information Technology

$3,513

$10,771

$0

$10,771

$11,090

$4,199

Walmart

WMT

Consumer Staples

$3,249

$7,410

$8,296

$29,131

$68,413

$6,159

Alphabet

GOOG/L

Communication Services

$2,650

$9,075

$4,846

$19,394

$20,312

$0

Visa

V

Information Technology

$2,494

$7,914

$6,880

$30,050

$56,589

$1,750

Amgen

AMGN

Health Care

$2,250

$17,920

$3,351

$26,902

$49,944

$3,609

Internat'l Bus Machines

IBM

Information Technology

$2,073

$4,614

$4,533

$28,206

$98,936

$5,588

Top 20

$99,037

$339,982

$167,855

$919,294

$1,368,840

$118,690

S&P 500

$222,980

$806,408

$519,397

$2,987,621

$4,703,661

$490,570

Top 20 % of S&P 500

44.42%

42.16%

32.32%

30.77%

29.10%

24.19%

Gross values are not adjusted for float

As more companies look to add value through share repurchases, ETF investors can also capitalize on the potential opportunity through buyback-themed ETF strategies.

For instance, ETF investors who believe in a rise in share repurchases can look to ETFs that specifically target companies that implement buyback schemes, including the Invesco Buyback Achievers ETF (PKW) , the SPDR S&P 500 Buyback ETF (SPYB) and iShares U.S. Dividend and Buyback ETF (Cboe:DIVB) .

PKW includes a broader selection of U.S. companies that have effected a net reduction in shares outstanding by 5% or more in the trailing 12 months. SPYB focuses on S&P 500 companies with the highest buyback ratio in the past 12 months. DIVB is comprised of U.S. stocks with a history of dividend payments and or share buybacks where holdings include those with the largest dividend and buyback programs in the market measured by dollar value.

S&P Dow Jones Indices

S&P 500, $ U.S. BILLIONS

(preliminary in bold)

PERIOD

MARKET

OPERATING

AS REPORTED

DIVIDEND &

VALUE

EARNINGS

EARNINGS

DIVIDENDS

BUYBACKS

DIVIDEND

BUYBACK

BUYBACK

$ BILLIONS

$ BILLIONS

$ BILLIONS

$ BILLIONS

$ BILLIONS

YIELD

YIELD

YIELD

2018 Prelim.

$21,033.30

$1,281.83

$1,116.83

$456.31

$806.41

2.17%

3.83%

6.00%

2017

$22,821.24

$1,066.00

$940.86

$419.77

$519.40

1.84%

2.28%

4.12%

2016

$19,267.93

$919.85

$818.55

$397.21

$536.38

2.06%

2.78%

4.85%

2015

$17,899.56

$885.38

$762.74

$382.32

$572.16

2.14%

3.20%

5.33%

2014

$18,245.16

$1,004.22

$909.09

$350.43

$553.28

1.92%

3.03%

4.95%

5YR Total (mkt avg)

$19,853.44

$5,157.28

$4,548.07

$2,006.05

$2,987.62

10.10%

15.05%

25.15%

10YR Total (mkt avg)

$16,124.68

$9,119.73

$8,158.26

$3,240.14

$4,703.66

20.09%

29.17%

49.26%

12/31/2018 Prelim.

$21,033

$293.99

$240.31

$119.81

$222.98

2.17%

3.83%

6.00%

9/30/2018

$24,579

$349.04

$306.70

$115.72

$203.76

1.81%

2.93%

4.75%

6/30/2018

$23,036

$327.53

$288.55

$111.60

$190.62

1.89%

2.80%

4.69%

3/29/2018

$22,496

$311.26

$281.28

$109.18

$189.05

1.90%

2.56%

4.46%

12/29/2017

$22,821

$288.93

$230.12

$109.46

$136.97

1.84%

2.28%

4.12%

9/29/2017

$21,579

$268.35

$243.68

$105.45

$129.17

1.92%

2.40%

4.32%

6/30/2017

$20,762

$261.39

$231.40

$104.01

$120.11

1.96%

2.41%

4.37%

3/31/2017

$20,276

$247.32

$235.65

$100.86

$133.15

1.98%

2.51%

4.49%

12/31/2016

$19,268

$240.11

$207.93

$103.82

$135.29

2.06%

2.78%

4.85%

9/30/2016

$18,742

$247.98

$219.46

$98.43

$112.20

2.10%

2.92%

5.01%

6/30/2016

$18,193

$222.77

$201.79

$98.30

$127.50

2.14%

3.22%

5.36%

3/31/2016

$17,958

$208.99

$189.37

$96.67

$161.39

2.15%

3.28%

5.43%

12/31/2015

$17,900

$201.95

$163.76

$99.39

$145.88

2.14%

3.20%

5.33%

9/30/2015

$16,917

$224.14

$204.58

$95.07

$150.58

2.22%

3.30%

5.52%

6/30/2015

$18,219

$230.84

$201.35

$94.45

$131.56

2.03%

3.04%

5.07%

3/31/2015

$18,303

$228.45

$193.05

$93.41

$144.13

1.98%

2.94%

4.92%

12/30/2014

$18,245

$237.14

$202.31

$92.80

$132.63

1.92%

3.03%

4.95%

For more information on the buybacks strategy, visit our buybacks category.

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