A number of U.S. companies have announced an increase in share repurchases, bolstering sentiment and exchange traded funds that focus on the share buyback strategy.
In December, Facebook Inc., Mastercard Inc., Lowe’s Co s., AbbVie Inc., United Rentals Inc. and Pioneer Natural Resources Co. are among the companies that have revealed bigger or resumed share buybacks this month, the Wall Street Journal reports.
S&P 500 companies spent a record amount on buybacks over the third quarter, investing roughly $200 billion back into their own company shares.
“Corporations have been a large, incremental buyer. That’s had a very large impact on equity market returns over the last few years,” Wasif Latif, head of global multiasset investing at USAA Asset Management, told the WSJ. “It seems like that large upward pressure is going to continue to be there.”
Some U.S. corporations have pointed to uncertainty over tariffs as a major contributing factor that affected their spending decisions. Consequently, many companies have slowed the pace of spending on equipment, factories and other capital goods, even with the U.S. economy performing better than it has in years.
“That still hasn’t been sustained enough to give corporations the confidence to invest in real projects, so they continue to do stock buybacks,” Latif added.
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 (NYSEArca: PKW), the SPDR S&P 500 Buyback ETF (NYSEArca: 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.
For more information on the buybacks strategy, visit our buybacks category.