US: Are companies becoming more cautious about stock buybacks?

■　Stock buybacks fall sharply, but it still takes time to set the underlying tone

 Shareholder returns (dividends and stock buybacks) for S&P 500 component companies were mixed between April and June, according to data compiled by Standard & Poor's Global Inc. Dividends reached $140.6 billion, up 2.2% from the previous year ($137.6 billion) and up 13.9% year-over-year. Dividend amounts resumed their steady upward trend and reached their highest level for the fourth consecutive quarter, with a relatively small decline despite the impact of the epidemic.

 On the other hand, the amount of stock buybacks is $219.6 billion, up 10.5% from the previous year, when the company was recovering from the effects of the new crown epidemic, but down 21.8% from the previous period ($281 billion). Over the eight-year period from 2015-2022, the amount of stock buybacks in the April-June period exceeded the amount in the January-March period only twice, in 2018 and 2021. The momentum of stock buybacks tends to weaken in the April-June period, and we will need to wait for the results of the July-September period to determine the underlying tone. That said, it is also important to realize that companies may become more cautious about share repurchases due to uncertainty about their earnings prospects.  By sector, information technology (IT, $72 billion, up 0.5% year-over-year) remained high, accounting for about 33% of the total, while finance ($21.2 billion, down 61.2% year-over-year), health care ($17.2 billion, down 58.2% year-over-year) and capital goods ($17.8 billion, down 27.9% year-over-year) declined significantly. Differences in the business environment also influence the increase or decrease in share repurchases.

 By stock buybacks, management aims to reduce the number of shares outstanding and increase earnings per share (EPS, net income/ shares outstanding), thereby increasing the share price. According to data compiled by financial information firm Refinitiative (as of Sept. 23), EPS for companies comprising the S&P 500 rose 4.6% year-over-year between July and September, slowing from the previous quarter (+8.4%) and a downward revision since the beginning of July (+11.1%). If the company maintains a cautious stance on its share buybacks during July-September, this will weaken support for EPS and should be viewed with caution.