Back to top

Real Time Insight

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

U.S. companies continue to splurge on their own shares. Per S&P, share repurchases increased to $128.2 billion during Q3 2013, up 8.6% from Q2 and up 23.6% from Q3 of 2012.

With record amount of cash on their balance sheets, companies are increasing both dividend and buybacks but buybacks portion has been growing faster than dividends.

Investors generally prefer dividends to buybacks as they are simpler to understand and put money in the pocket. However, buybacks have their own advantages—they reduce the outstanding share count and thus increase earnings per share.

Buybacks generally represent a vote of confidence by management in the company's stock. But at the same time, returning more cash to shareholders also implies that companies are not able to deploy their cash in a more efficient manner. Lack of confidence in the economic recovery coupled with fiscal uncertainty may be restraining companies from stepping up hiring or capital investments.

Availability of cheap money also encourages companies to spend more on buybacks. Rising interest rates may lead to a slowdown in the buybacks activity.

Per PIMCO’s Bill Gross, “Stocks have their own QE: corp buybacks” at $500 billion a year. They are a main reason stocks go up. When do THEY taper?”

Here is a chart from FactSet that shows the correlation between buybacks and S&P 500 index.



My RTI questions are 1) Were buybacks a main factor behind the stock market rally? And 2) Will the slowdown in buybacks hurt the rally?

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>

5 Stocks to Double in 2014

Today, you are invited to receive a free Special Report from Zacks Investment Research. It reveals five companies that could gain +100% and more in the next 12 months.

One is set to ride a little-known All-American energy boom. Another is a chip maker looking for big gains through Google Glass. Another could be the next alternative energy "Tesla."

Close This Panel X

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GROUP DXYN 15.84 +7.90%
BOFL HOLDING BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%