In this article, we take a look at 10 stocks with the biggest buybacks. If you want to see more stocks with the biggest buybacks, go directly to 5 Stocks with the Biggest Buybacks.
When they generate a profit, companies can choose to keep the profits on their balance sheet, invest the profits back into the company, use the profits to buy other companies, or return the profits back to shareholders.
In terms of returning profits back to shareholders, the two main ways companies return capital back to shareholders is through stock buybacks and dividends.
When it comes to whether companies should return capital through buybacks or through dividends, both have their advantages and disadvantages.
Whereas many shareholders would not be happy if a company were to cut its regular dividend, most investors don’t expect companies to buy back their stock regularly. As a result, stock buybacks offer management more flexibility than dividends. Stock buybacks have historically also been taxed less than dividends as well although different investors have different tax rates.
Stock buybacks can add value if done correctly as they can increase earnings per share if a company maintains its profits. If a company earns $1 per share, for instance, and the company buys back half of its stock and doesn’t issue new shares, that company would then earn $2 per share. If that company’s P/E valuation stays the same, its stock could potentially rise substantially as a result and generate a total return of potentially more than if the same company were to return the same amount of capital through a dividend.
Stock buybacks can also destroy value if done incorrectly. If a company’s management buys back its stock at too high of a price, shareholders would have been better off if management had paid a dividend instead.
Given the advantages and disadvantages of stock buybacks and dividends, many companies have chosen to return capital through both. In terms of recent years, however, companies in the S&P 500 in aggregate have returned more capital through stock buybacks than through dividends.
Buybacks
In terms of recent buybacks versus dividends, total aggregate buybacks in the S&P 500 for Q3 2022 were $210.8 billion, down 10.1% from Q3 2021’s $234.6 billion. By comparison total Q3 2022 dividends paid were $140.3 billion, up from $130 billion in Q3 2021.
In Q3 2022, 319 companies in the S&P 500 bought back stock of at least $5 million in the quarter, up from 309 in Q3 2021.
In terms of taxes, 2023 is a new year with new rules when it comes to stock buybacks.
As a result of the inflation reduction act of 2022, there will be a 1% excise tax on the repurchases of stocks after December 31, 2022.
Many believe there could be slightly less buybacks and potentially more dividends as a result.
Image by Sergei Tokmakov Terms.Law from Pixabay
Methodology
For our list of 10 Stocks with the Biggest Buybacks, we used preliminary S&P 500 stock buyback data for Q3 2022 from S&P Dow Jones Indices and we ranked them based on their Q3 2022 buybacks.
We also included the number of hedge funds in our database of 920 funds that owned shares of the same stock at the end of Q3.
For those of you interested, check out 15 Companies That Are Buying Back Their Stock.
10 Stocks with the Biggest Buybacks
10. Chevron Corporation (NYSE:CVX)
Q3 2022 Buybacks (Million): $3,697
Number of Hedge Fund Holders: 66
Given the Russia Ukraine war, oil and gas prices have increased from 2021 levels and many big oil companies have benefited with bigger profits. In the third quarter of 2022, Chevron Corporation (NYSE:CVX) adjusted earnings surged to $10.8 billion versus adjusted earnings of $5.7 billion in Q3 2021 as a result.
Given the profit increases and substantial free cash flow, Chevron Corporation (NYSE:CVX) paid dividends of $2.7 billion and also repurchased around $3.7 billion of shares in the quarter. Considering strong earnings in Q2 2022, the company in July boosted the top end of its annual share repurchase guidance range to $15 billion. Chevron Corporation (NYSE:CVX)’s previous annual buyback guidance was $5 billion to $10 billion.
Alongside Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL), Chevron Corporation (NYSE:CVX) is a stock that is owned by many hedge funds in our database that repurchased a lot of shares in Q3.
9. NVIDIA Corporation (NASDAQ:NVDA)
Q3 2022 Buybacks (Million): $3,779
Number of Hedge Fund Holders: 89
Given the company doesn’t have a substantial dividend yield, NVIDIA Corporation (NASDAQ:NVDA) has returned most of its excess capital through buybacks in recent years. Considering its profits have increased substantially given demand growth for GPUs, NVIDIA Corporation (NASDAQ:NVDA) board of directors in May of 2022 increased and extended the company’s repurchase program to up to $15 billion through December 2023. With the buyback authorization, NVIDIA Corporation (NASDAQ:NVDA) bought back nearly $3.8 billion worth of shares in Q3, ranking the company #9 on our list of 10 Stocks with the Biggest Buybacks.
Baron Funds commented on NVIDIA Corporation (NASDAQ:NVDA) in a Q3 investor letter,
“NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company and a leader in gaming and accelerated computing. NVIDIA is powering the growth of AI from the data center to the edge. Shares detracted due to inventory right sizing in NVIDIA’s gaming segment coupled with the broader market sell-off in growth stocks. Given NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, we believe the company can sustain its growth trajectory. See further discussion of NVIDIA in the top net purchases section below. During the third quarter, we took advantage of its stock sell-off to add to NVIDIA Corporation, a fabless semiconductor mega cap that is a global leader in gaming cards and accelerated computing hardware and software. The sell-off was driven by a near-term inventory correction in gaming as a result of a COVID-related pull forward in demand as well as the shift in the Ethereum cryptocurrency from proof-of-work to proof-of-stake. Additionally, investors are concerned over the potential slowdown in data center revenues as a result of a weaker macroeconomic environment as well as the recently announced limitations on semiconductor shipments to China. Despite the near-term uncertainty, we believe that NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, would enable the company to benefit from durable growth for years to come and therefore view the stock price where we added shares as a compelling value for long-term investors. With demand for computing power doubling every one to two years, and Moore’s Law slowing down, there is more need for computing than ever. At the same time, “near free” supply growth (that was possible thanks to Moore’s Law) has slowed dramatically. NVIDIA’s accelerated architecture, with parallel computing at scale, answers that need.”
8. Marathon Petroleum Corporation (NYSE:MPC)
Q3 2022 Buybacks (Million): $3,908
Number of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) bought back over $3.9 billion worth of its own shares in the third quarter as it completed its $15 billion return of capital commitment in October utilizing proceeds from its Speedway divestiture. In 2021, Marathon Petroleum Corporation (NYSE:MPC) sold Speedway to 7-Eleven for an estimated $16.5 billion of after-tax cash proceeds. As a result of its buyback program, Marathon Petroleum Corporation (NYSE:MPC) repurchased around 30% of its outstanding shares. After completing its $15 billion return of capital commitment, Marathon Petroleum Corporation (NYSE:MPC) has approximately $5 billion remaining available under its current share repurchase authorizations.
7. Lowe’s Companies, Inc. (NYSE:LOW)
Q3 2022 Buybacks (Million): $3,999
Number of Hedge Fund Holders: 61
Lowe’s Companies, Inc. (NYSE:LOW) has one of the biggest buyback authorizations among retailers after its board of directors announced a $15 billion buyback authorization with no expiration date. The company also still has $6.4 billion left on its previous buyback program as of December 2022. As far as buybacks go, Lowe’s Companies, Inc. (NYSE:LOW) bought back a lot of stock in Q3, with repurchases of nearly $4 billion. If it can increase earnings and not issue any new shares, the buybacks could help increase EPS for Lowe’s Companies, Inc. (NYSE:LOW) in the long term.
6. The Procter & Gamble Company (NYSE:PG)
Q3 2022 Buybacks (Million): $4,000
Number of Hedge Fund Holders: 69
While it is more famous for its dividend given the consumer staple’s long history of increasing it every year, The Procter & Gamble Company (NYSE:PG) has also returned a lot of capital back to shareholders through share repurchases. In the third quarter, The Procter & Gamble Company (NYSE:PG) returned $4 billion of capital through buybacks, ranking #6 on our list of 10 Stocks with the Biggest Buybacks. For fiscal 2023, the company expects to pay around $9 billion in dividends and to repurchase $6 billion to $8 billion of common shares. Of the 920 hedge funds in our database, 69 owned shares of The Procter & Gamble Company (NYSE:PG) at the end of Q3.
Like The Procter & Gamble Company (NYSE:PG), Meta Platforms, Inc. (NASDAQ:META), Alphabet Inc. (NASDAQ:GOOG), and Apple Inc. (NASDAQ:AAPL) are stocks held by many hedge funds in our database that have bought back a lot of shares in the third quarter.
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Disclosure: None. 10 Stocks with the Biggest Buybacks is originally published on Insider Monkey.
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