The truth about the hundred of billions of dollars worth of stock buybacks 💸

They're not as high as they may seem 🤔

The dollar value of stock buybacks has been trending higher. (Source: S&P Dow Jones Indices)

One of the more controversial decisions executives and board members of a corporation will make is whether to buy back shares of its own stock.

Among the uses of corporate cash,¹ buying back stock is often considered less productive for the economy than spending toward capital expenditures and other growth projects that may be directly associated with job creation. It’s why stock buybacks often draw politicians’ ire.

I’m not going to get into the pros and cons of buybacks here. But I do think it’s worth putting the scale of buybacks in the context of the greater stock market and its impact on earnings.

Buybacks aren’t dominating the stock market 🤷🏻‍♂️

According to data from S&P Dow Jones Indices (SPDJI), S&P 500 companies bought back $795.2 billion worth of stock in 2023, which included $219.1 billion repurchased in Q4. See the chart above.

While this number may seem staggering, buybacks are actually down 13.8% from $922.7 billion in 2022.

And while it’s true that the dollar value of buybacks has generally trended higher over the years, it’s not true that this activity is a particularly large or growing share of the market.