“Cash Rich” S&P 500 Companies Accelerating Buybacks in 2018

September 12, 2018 | Derek Schmidt, CFA, CAIA, Senior Research Analyst, Private Equity

“Cash Rich” S&P 500 Companies Accelerating Buybacks in 2018

S&P 500 companies have become “cash rich” as the combination of tax reform and a decade of strong economic growth has resulted in very healthy corporate balance sheets. Accordingly, we have seen the level of cash allocated to corporate stock buybacks steadily increase as corporate leaders continue to have confidence in their companies’ future growth prospects.

During the first half of 2018, the level of S&P 500 planned corporate buybacks has picked up substantially, with announcements exceeding $600 billion through July, which already exceeds the annual levels over the prior decade. Tax reform has significantly improved the profitability of companies, reducing their corporate tax rate from 35% to 21%, with much of that improved cash flow being redeployed into funding business expansions, R&D efforts, acquisitions, and most notably stock buybacks.

However, these numbers are announced buyback approvals and corporations are not always compelled to execute on announced buybacks. If their stock continues higher or growth prospects weaken, they may wait for a more reasonable valuation before executing the buyback. If buybacks are executed prior to growth prospects decelerating and/or a decline of the stock price the capital used on buybacks could prove to have been capital destructive.

It remains unknown how much of these buyback approvals will actually be deployed by S&P 500 companies in today’s high valuation environment. Only time will tell if this corporate buyback activity is well timed or capital destructive.

Print PDF

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.


Derek Schmidt, CFA, CAIA
Senior Research Analyst, Private Equity

Get to Know Derek

Related Content

Can Hurricanes Drive Inflation Higher


Can Hurricanes Drive Inflation Higher?

Given the most recent hurricane to hit the U.S. — Hurricane Florence — our chart of the week examines the…

Does Shorter Duration Pay Off When Interest Rates Rise


Does Shorter Duration Pay Off When Interest Rates Rise?

With the Fed poised to further raise rates this year as well as next, it is insightful to investigate how…

Is Either Side Winning the U.S. – China Trade War


Is Either Side Winning the U.S.–China Trade War?

Given everything that’s going on in the markets it is easy to get confused about what’s happening in our trade…


Will Rising Rates Damage Real Estate Returns?

Our chart this week examines the historical1 total returns of the NCREIF Property Index (“NPI”) during times of rising interest…

chart displaying Looming Maturity Wall for Emerging Markets Debt


Looming Maturity Wall for Emerging Markets Debt

This week’s chart looks at the looming maturity wall for emerging markets debt. The chart shows the amounts coming due…

Chart displaying market cap of the five largess S&P 500 stocks since the late 1990's


Tech Sector Bubble?

Our Chart of the Week examines the concentration in market cap over time among the five largest stocks in the…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >