S&P 500 buybacks set quarterly and 12-month records

Movers and Shakers wrote a column · Jun 20, 2022 12:16

S&P 500 Q1 2022 buybacks were $281.0 billion, up 4.0% from Q4 2021's record of $270.1 billion; the 12-month March 2022 expenditure of $985 billion set a record, up 11.7% from 2021's record of $882 billion and up 97.2% from the 12-month March 2021's $499 billion.

• 374 companies reported buybacks of at least $5 million for the quarter, up from 325 in Q4 2021 and up from 335 in Q1 2021; 395 companies did some buybacks for the quarter, up from 383 in Q4 2021 and up from 370 in Q1 2021; 432 companies did some buybacks for the 12-months ending March 2022, up from 416 in the prior period.

• Buybacks remained top-heavy but declined significantly with the top 20 companies accounting for 42.1% of Q1 2022 buybacks, down from Q4 2021's 51.8%, down from the dominating 87.2% in Q2 2020, and down from the pre-COVID historical average of 44.5%.

• S&P 500 Q1 2022 dividends increased 2.8% to a record $137.6 billion from Q4 2021's $133.9 billion and were 11.1% greater than the $123.9 billion in Q1 2021. For the 12-months ending March 2022, dividends were a record $524.9 billion, up 9.3% on an aggregate basis from the 12-month's March 2021's $480.1 billion.

• Buybacks are expected to continue at a higher level for Q2 2022, even as prices have declined, as reduced prices will increase the number of shares purchased and lift EPS due to share reduction.

Source: S&P DOW JONES INDICES

Q1 2022 GICS®(Global Industry Classification Standard) Sector Analysis:

• Information Technology continued to lead in buybacks, even as its percentage of buybacks declined. In Q1 2022, IT’s share declined to 25.5% of all S&P 500 buybacks compared to Q4 2021’s 27.7% and Q1 2021’s 31.6%, as expenditures decreased (4.4%) to $71.6 billion from the prior quarter’s $74.9 billion and were 27.0% higher than the Q1 2021 expenditure of $56.4 billion.

• Health Care buybacks increased 88.3%, spending $41.1 billion in Q1 2022 representing 14.6% of all buybacks, up from the Q4 2021 $21.8 billion, which accounted for 8.1% of the buybacks.

• Financial buybacks increased 6.2% to $54.7 billion, representing 19.5% of the buybacks, from the Q4 2021 $51.5 billion, which represented 19.1% of all buybacks. The 12-month buybacks of $209.9 billion were 202% higher than the 12-month March 2021 buybacks of $69.4 billion, when the Fed limited buybacks.

• Energy buybacks increased by 12.3% for the quarter, to $8.6 billion, from the prior quarter's $7.6 billion and up 1,654% from the Q1 2021 $0.5 billion. For the 12-months, buybacks were $20.8 billion compared to the prior period’s $0.9 billion, a 2,092% increase.

• Communication Services buybacks decreased by 21.3%, to $34.1 billion, from the prior quarter's $43.3 billion and up 56.4% from the Q1 2021 $21.8 billion. As a percentage of all buybacks, the sector decreased to 12.1% of all buybacks from the prior quarter's 16.0%, and the Q1 2021 12.2%.

Source: S&P DOW JONES INDICES

Outlook for Q2 2022:

Companies are expected to maintain their buyback activities for Q2 through the current price downturn. This means companies will be getting more shares for their expenditures and reducing share counts even further, resulting in higher EPS. Operating earnings, which had set a record in Q4 2021, declined an estimated 13% in Q1 2022, but are expected to rebound in Q2 2022, with more issues benefiting from lower share counts and therefore adding stronger tailwinds to their EPS.”said Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices.

Beyond Q2, at the minimum, companies are expected to cover exercised options, with stronger-cash-flow issues continuing to reduce shares. Given the strong base buying, expected earnings, even with the current level of inflation, a consumer spending slowdown and lower margins, buybacks could easily set another record in 2022.”

Silverblatt noted that “the 12-month March 2022 buyback record of $984.6 billion, which is expected to surpass the $1 trillion mark for the first time for June 2022.”

Source: S&P DOW JONES INDICES

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