$918B Poured into Share Buybacks in Q3 — Evening Brief – 12.13.24
S&P 500 stock buybacks in the third quarter of 2024 decreased 4.0% to $226.6 billion from $235.9 billion in the second quarter but increased 22.1% from the third quarter of 2023. The 12-month buyback expenditure through September 2024 rose 16.7% to $918.4 billion, reported S&P Dow Jones Indices.
A total of 332 companies reported buybacks of at least $5 million for the quarter, up from 324 in the second quarter and up from 281 in the third quarter of 2023. The report noted that 381 companies did “some” buybacks, up from 373 in the second quarter and up from 362 in the third quarter of 2023. Meanwhile, 425 companies did some buybacks in the last 12-month period, up from 420 in the prior 12-month period.
Buybacks remained top heavy, as concentration increased, with the top 20 S&P 500 companies accounting for 53.2% of buybacks, up from 52.3% in the second quarter, and above the historical average of 47.6% and the pre-COVID historical average of 44.5%.
“After declining in 2023, companies have increased their buyback expenditure but have remained in a dollar range for the first three quarters of 2024,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. “This was amidst significant stock price increases with the result being fewer shares purchased and less of an upward EPS push.”
Information Technology maintained its lead in buybacks despite a 6.4% decrease, representing 28.2% of all buybacks for the quarter, while Consumer Discretionary increased spending by 13.5% to $20.6 billion.
Financials decreased buybacks by 2.7% as it collectively spent $44.1 billion on buybacks, accounting for 19.4% of all S&P 500 buybacks. This was down for the quarter compared to expenditures of $45.3 billion in the second quarter, and up 50.3% from $29.3 billion in the third quarter of 2023. For the 12-month September 2024 period, Financials spent $161.8 billion, up from $131.4 billion for the prior 12-month period.
The 1% buyback tax reduced operating earnings by 0.42% in the third quarter, the report noted. “The 1% tax remains a manageable expense and has not impacted overall buybacks at this point,” Silverblatt added. “However, given the initial 1% buyback tax had bipartisan support and remains an attractive cash generator, there is an expectation that some increase or potential change to the type of buybacks that are taxed will remain on the table as the U.S. budget negotiations start.”
Apple dominated with $25.4 billion in buybacks, followed by Alphabet at $15.3 billion, NVIDIA at $12.7 billion, Meta Platforms at $12.4 billion, and JP Morgan at $6.4 billion. Total shareholder returns (buybacks + dividends) decreased 1.5% to $383.6 billion.