FTSE 100 companies are on course to post a new record for share buy-backs following today’s announcement by oil giant, BP PLC (LSE:BP.), beating the previous high in 2018, according to AJ Bell investment director Russ Mould.
He calculated buy-backs are set to total a whopping £55.5bn in 2022 above 2018’s previous peak of £34.4bn.
This is on top of bumper dividend pay-outs of £81.5bn, slightly below the record, also set in 2018, of £85.2bn.
“Thirty-nine members of the FTSE 100 have announced or carried out share buybacks in 2022 to date” Mould said with BP’s announcement today catapulting it into second place in terms of this year’s buy-back announcements by FTSE 100 members.
Shell PLC (LSE:SHEL, NYSE:SHEL) tops the list with Aviva PLC (LSE:AV.) completing the top three.
“It also cements the oil and gas sector’s position at the top of the buy-back charts, as ranked by industrial sector” he added.
“This buy-back largesse complements analysts’ forecasts for aggregate ordinary dividend payments from the FTSE 100 of £81.5bn and special dividends of £1.3bn. That is a total of £138bn and equivalent to 7.5% of the FTSE 100’s current total market capitalisation of £1.8 trillion” Mould estimated.
That may provide some succour to patient investors who are looking at a low-single-digit percentage decline from the FTSE 100 index in capital terms in the year to date.
Mould suggested “The bumper cash returns may therefore be helping to persuade investors to stick with UK equities rather than look elsewhere although the danger remains that buy-back plans are revised and dividend forecasts prove over-optimistic, should a recession or other unexpected development strike.”
He pointed out that in 2020, FTSE 100 firms returned £10.2bn to shareholders via buy-backs but scrapped plans to buy back £10.3bn more as the pandemic spread and lockdowns were imposed.