US stocks: Shares repurchase shows a downward trend


■ Dividends of American enterprises remain at a historical high, and share repurchases show a downward trend

■ Due to the tax on share repurchases, the shareholder return policy of American enterprises may be inclined to dividend

    According to S&P global statistics, the dividend of S&P 500 index companies in the quarter from July to September last year was US $140.3 billion, up 7.9% year on year. Even during the COVID-19 epidemic, the decrease of dividend amount was relatively small, but it resumed a steady upward trend and maintained the highest level ever.

    On the other hand, the amount of share repurchases was US $210.8 billion, down 4.0% from the previous period (US $219.6 billion). Since its recent peak (US $281 billion) from January to March 2022, it has been on a downward trend. The earnings per share (EPS) of S&P 500 companies next year is expected to peak in July 2022 and turn into a downward trend. It can be explained that the enterprise has taken a cautious attitude towards the purchase of the company's shares due to its vigilance against the uncertain earnings prospects.
    From the perspective of the industry, information technology (IT, US $60.8 billion, down 15.5% month-on-month), which has been the driving force so far, reduced share repurchases, and its share fell (32.8% to 28.8% month-on-month) The decline in general consumer goods (19.5 billion US dollars, down 29.3% year on year) was also significant. Large technology companies are under pressure as a whole, with 6 of the 11 sectors of the S&P 500 index declining on a month-on-month basis. On the other hand, finance (US $23 billion, an increase of 8.5% year-on-year), energy (US $22 billion, an increase of 64.5% year-on-year) and medical (US $20.2 billion, an increase of 17.2% year-on-year) increased year) significantly. The difference in the operating environment affected the increase and decrease of the company's stock purchase.
    Operators reduce the number of shares issued by repurchasing their own shares, increase earnings per share (EPS, net income/number of shares issued), and increase share prices. According to the data of the financial information company Refinitiv (as of February 2), the market expects the EPS of S&P 500 companies to decline for three consecutive quarters from the quarter of October to December last year to the quarter of April to June this year. As a result, the momentum of share repurchase may weaken. In addition, from January 2023, American companies that buy back their own shares will be taxed. The applicable tax rate is 1%. At this time, it is difficult to predict how much impact it will have on corporate behaviour. However, due to the bipartisan support of the share repurchase tax, if the tax rate increases in the future, the shareholder return policy of American companies may shift to emphasize dividends.