S&P 500 listed companies collectively hiked buybacks by almost a fifth in the final quarter of the year to mitigate the likes of share issuance and employee options being exercised.
According to S&P Global, share repurchases by companies on the exchange totalled US$219.1 billion over the last three months of 2023.
This was up by 18% on the US$185.6 billion worth of buybacks in the third quarter and an increase of 3.7% on the US$211.1 billion spent on repurchases a year earlier.
As per S&P, led by larger firms, buybacks were hiked “to counter the impact of both share issuance and employee options being exercised”.
Despite the growth in the value of buybacks, S&P said the share count impact on per-share earnings decreased for the fifth consecutive quarter.
“The higher cost of shares reduced the number of shares they received and reduced the impact on share-count-reduction,” the firm explained.
Just 12.3% of those involved in buybacks saw a significant increase in per-share earnings, compared to 19.4% a year earlier.
Looking ahead, S&P signalled a reduction in wider spending on buyback due to macroeconomic uncertainty.
“Given the market's expectations for interest rates to decline later in the year, even as higher-for-longer interest rates continue, companies may be shy of financing buybacks going forward, as discretionary buybacks, which reduce share count, may need to be financed from ongoing operations,” S&P said.
Ahead of the market’s opening, futures trading had the S&P 500 down 16 points at 5,198.