Stock Buybacks Are Here to Stay

In the 12 months ending June 30, companies in the S&P 500 index spent a record $1 trillion to buy back their own stock, according to the S&P Dow Jones Index. But until January, a new 1% tax on buybacks could dampen corporate America’s appetite. S&P Dow Jones estimates that the tax would reduce corporate profits by half a percentage point at current buyback levels.

Buybacks have recently become controversial, with critics arguing that there are better uses for corporate cash. But a 2020 S&P Dow Jones Indices analysis of the 100 largest buyback companies found that long-term stock returns generally outperformed the S&P 500.

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