ETFs to Capture the Surge in Corporate America's Share Buybacks

Corporate America’s cash infusion is being used to fuel a surge in share repurchases, bolstering ETFs that cover the buyback theme.

Goldman Sachs analysts revealed that for the first time in a decade, buybacks accounted for the largest share of cash spending among S&P 500 companies, reports William Watts for MarketWatch.

Over the first half of 2018, buybacks increased 48% to $384 billion from $259 billion for the same period last year. The share buyback authorizations for all U.S. companies also jumped to $762 billion through mid-September, the Goldman analysts said in a note, adding that the full-year tally is projected to hit a record above $1 trillion if companies maintain their current pace.

Buyback-Themed ETF Strategies

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 PowerShares Buyback Achievers Portfolio (NYSEArca: PKW), the SPDR S&P 500 Buyback ETF (NYSEArca: SPYB), iShares U.S. Dividend and Buyback ETF (Cboe: DIVB) and AdvisorShares Wilshire Buyback ETF (NYSEArca: TTFS).

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. Lastly, TTFS is comprised of companies that have a reduction in outstanding shares and meet specific leverage and cash flow requirements, weighting components based on Wilshire’s quantitative buyback strength signal.

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