The data is in, and it says stock buybacks are back in a big way as companies seek out ways to keep their stock prices at elevated levels.
First quarter stock repurchases clocked in at $178.1 billion among S&P 500 companies, up 36.5% from the fourth quarter of 2020, according to new data out Tuesday from S&P Global. Buybacks were up 100.9% from the second quarter 2020 pandemic low of $88.7 billion.
Stock buybacks have the effect of lowering the number of shares outstanding for companies. By extension, that helps to boost per share earnings and potentially a company's stock price.
S&P 500 Global said 335 companies reported buybacks of at least $5 million in the first quarter, up from 244 in the fourth quarter of 2020.
What's no surprise is that the world's biggest, cash rich companies continue to be the most aggressive around in terms of buybacks. S&P Global said the top 20 companies for stock buyback activity accounted for 53.3% of the first quarter buybacks, up from the historical pre-COVID 19 average of 44.5%.
That top 20 — led by Apple, Alphabet, Microsoft, Berkshire Hathaway and Facebook — repurchased $94.9 billion in stock for the first quarter. In the fourth quarter of 2020, the top 20 bought back $74.7 billion of their stock.
S&P Global sees buyback activity staying firmly intact for the balance of 2021.
"Buybacks are expected to continue at a higher level in 2021 as big banks, via Fed approval for the second half of the year, have returned to the buyback market, and more companies are expected to expand their buybacks to discretionary purchases used to reduce share count and increase earnings-per-share," S&P Global senior index analyst Howard Silverblatt said.
The buyback activity appears to be having its intended consequence in the the broader market.
Silverblatt calculates that 5.9% of S&P 500 companies reduced share counts by at least 4% year-over-year in the first quarter. Subsequently, the buyback boost coupled with strong first quarter earnings has helped support a historically high forward price-to-earnings multiple for the S&P 500 and stocks at a record level.
Concludes Silverblatt, "For the remainder of 2021, strong cash-flow issues are expected to continue to dominate the buyback headlines, but the broader market and economic story may be the breadth, expenditures and willingness of the companies, which mostly shut down their programs over COVID uncertainties, to return to buybacks."
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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