Senior markets reporter Jared Blikre joins Yahoo Finance Live to take a look at several of the leading stock buyback programs offered by companies ahead of the new buyback tax set to take effect in 2023.
Video Transcript
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SEANA SMITH: Well, we were just talking about earnings. Let’s take a step back because as we look at some of the big themes from this very busy earnings week, Jared Blikre is joining me here in studio to break down some of those themes. And, Jared, let’s start with dividends and buybacks and what we’ve heard over the past five trading days.
JARED BLIKRE: Yes. Well, dividends and buybacks, perfect story is ExxonMobil just recently released its results this morning. They upped their dividend to $0.91 per share from $0.88 per share, and they reiterated their– a lot of their guidance. Now, they ended the quarter with $30 billion in cash, and that’s where they want to be.
Now, President Biden has criticized the oil industry– not singling out anybody in particular– but about not returning profits– or excuse me– not– keeping profits from the American people. So I think Exxon’s point this morning, they even said outright, we are returning profits to American shareholders. Get that right there.
But we also know it’s not just the energy companies. It’s also big-tech companies like Apple, Amazon. I have some figures from Apple here. They had $3.7 billion worth of dividends. That is our heat map here. Let me just put a chart of Apple so we can see that. Apple down 12.3% over this year.
And here’s the chart. Let me get to some of these figures here. $3.7 billion in dividends over the quarters, $25.2 billion in open market repurchases, so just shy of $30 billion for Apple. Now, you look at that chart there, it has mostly maintained its gains over the last three years, and you probably wouldn’t be too critical.
Even Amazon– let me pull up a chart of Amazon as well. Now, had a bit of a stumble today. You can see not quite right up to snuff in terms of that support line. But Amazon ended the quarter with $10 billion, potentially, in buybacks of which it committed $6 billion to buybacks. And they also have another $6.1 billion to go.
Then I want to turn our attention to Meta. Now, Meta is another story, you can see down 70.5% over the year, and really just slicing through a number of support levels. Well, get this. They spent $48 billion since the mid-level of 2021 at $300 per share, and that seems to be an overpayment for some of that stock right there.
So these criticisms come to light when companies stumble. And a perfect example is IBM. You can do share repurchases year after year after year, but it’s only after that finally hits the bottom line and it realizes– and shareholders realize this was a huge mistake, with 20/20 hindsight, that this comes to the forefront.
DAVID BRIGGS: All right, so let’s talk a bit more about buybacks ahead of a new law taking effect next year that will tax them at 1%. Goldman says they estimate they’ll top a trillion dollars, the largest on record. What’s the larger trend there?
JARED BLIKRE: Well, the larger trend is we’re probably going to see fewer buybacks because of this tax, at least a little bit. Now, 1% doesn’t seem like a lot, but it does on the margins. And when you’re talking about some of the largest marginal buyers of stock, which are oftentimes corporations themselves, this does matter.
Now, why don’t they just funnel this into dividends? Dividends can be taxed at a rate of up to 20%. And so that matters in terms of investors. Now, Goldman is saying in terms of this year, not next year when that law goes into effect, but this year, for the rest of the year, $4 and 1/2 to $5 billion going to be spent every day by corporations buying back stock.
So that is a huge tailwind for equities. Doesn’t mean that it’s going to overcome everything that we’ve seen. But given the fact that we’re off– that we are coming out of a blackout window because of earnings that are ongoing here, when companies release the results, well, then they can go back and buy back their stock after that. So that’s kind of where we are right now. So with this window opening, we’re going to see that tailwind as a tailwind applied to US stocks.
DAVID BRIGGS: All right, Jared Blikre, good stuff. Good to see you, my man. Have a good weekend.
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