US Corporations Are Still Lining Up to Buy Back Their Own Shares

The rising threat of an economic recession has done nothing to dissuade Corporate America from spending big on its own shares.

American firms announced a record $1.26 trillion of share buybacks in 2022, up 3% from a year ago, according to data compiled by Birinyi Associates. By the firm’s estimate, companies executed on 82% of that total, spending $1.03 trillion. And the outlays aren’t just to offset employee stock grants that would otherwise dilute ownership, Birinyi found. The number of shares outstanding has shrunk for the top buyers in recent years, a sign that those repurchases have bolstered equity prices, or in the case of 2022’s bear market prevented losses from snowballing.

As companies retrench for an economic slowdown, cutting costs on everything from advertising to travel and hiring, the continued commitment to share buybacks serves as a counter to the doom and gloom on Wall Street.

“Despite 98% or whatever survey you want to use of CEOs saying they are worried about a recession, they are still comfortable enough to spend money on stock buybacks, so are they really that worried?” said Jeff Rubin, director of research at Birinyi Associates. Barring a severe recession, another year of $1 trillion or more of buybacks wouldn’t be surprising, he said.

The steady demand from repurchases continues to be one the few upward forces left in the market at a time when investors of all stripes have been pulling back from stocks. About one week into 2023, an index tracking companies with the highest buybacks has beaten the S&P 500 by 1.9 percentage points — the second-best start to a year since 2009. During the past decade, the basket outperformed by 45 percentage points.