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Corporate Buybacks Gain Steam With Banks Poised to Boost Buying
High stock price valuations may be giving some investors pause, but it hasn’t stopped U.S. corporations from plowing even more cash into their shares.
Morgan Stanley and Wells Fargo Inc. are among the nation’s biggest lenders that signaled this week they’re stepping up repurchases and raising dividends after passing Federal Reserve stress tests with flying colors. Banks are joining the party after buybacks rose sharply in the first three months of the year, capping several quarters of gains following a pandemic-related dip in 2020. The moves bode well for stocks since buybacks are a direct way to boost share prices and companies are flush with cash as the U.S. economy rebounds from a year of lockdowns. “We think that buybacks will exceed all-time highs,” said Scott Ladner, chief investment officer at Horizon Investments LLC.
In the first three months of 2021, companies in the S&P 500 spent $171.5 billion on stock repurchases, according to data compiled by Bloomberg Intelligence. While still below pre-pandemic levels, the buying was a big jump from the last three months of 2020, when companies spent more than $120 billion on their own stocks. Buybacks have been on an upswing since the second quarter of 2020, when the Covid-19 crisis caused companies to drastically cut back on repurchases. Rising cash balances and improving earnings have inspired them to plow some of that capital back into their stocks. So far, tech companies have been the biggest buyers. In the first three months of the year, the information technology sector accounted for nearly a third of buybacks, led by Apple Inc. But now banks more than a decade on from the financial crisis and poised to benefit if interest rates rise are stepping up their repurchases.
Morgan Stanley’s plan to increase its dividend and shell out as much as $12 billion on buybacks over the next 12 months was among the most celebrated. The New York-based bank’s shares advanced 4.1% on the week. The bank commitments come at an opportune time for stock market bulls. The rally in the S&P 500 Index that added 8% in the second quarter has been slowing down amid concerns about a potential peak in profits and high earnings multiples, not to mention risks posed by coronavirus variants that are causing infections to surge in other parts of the world.
While the benchmark has continued to notch fresh records, the trading has been tepid with the S&P 500 logging just one day in which it rallied more than 1% in the past month. The index’s price to earnings multiple, on a trailing basis, is approaching 31 times compared with an average of 19 times over the past decade. Rising bank payouts are among the top reasons that strategists at Bank of America currently rank the sector as the most attractive. Buybacks in the group could total a median 7.6% of current market capitalizations over the next 12 months, according to projections from Seaport Research Partners analyst Jim Mitchell.
https://www.bnnbloomberg.ca/corporate-buybacks-gain-steam-with-banks-poised-to-boost-buying-1.1624810
dey might want to call someone who has about $22.5T of newly acquired 'cash' sitting around.
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Would not have it any other way
>>69013 pb
45XGN290 G4 SP on final at Morristown, NJ from Sarasota-Bradenton Int'l Airport
Ran this AC back a few days and found it was also used on June 30th and departed Morristown, NJ to Mid-Valley Airport, Tx for the border visit then a short hop to South Texas Int'l Edinburgh-where the 45 on Hannity Broadcast held and then back to Morristown, NJ
PF whiffed on the AC thought to be POTUS on Weds...they used dis one.
Got the Governor right but wrong with the AC for 45.
Made up for that today