Done right, they can be a good deal for shareholders.
THE TOPIC OF STOCK BUYBACKS is on the minds of politicians and investors alike, and it’s no wonder: 2018 was a banner year for companies buying shares of their own stock. Flush with cash, thanks to friendlier corporate tax policies, companies in Standard & Poor’s 500-stock index repurchased $806 billion of stock last year, up 55% from the previous year and 37% from the record set in 2007. The spending continues: Investment firm Goldman Sachs expects S&P 500 firms to spend $940 billion on buybacks in 2019.
With companies having already spent $4.7 trillion over the past decade on their own stock, politicians are beginning to wonder if that money would be better spent elsewhere. Earlier this year, Senators Chuck Schumer and Bernie Sanders announced plans to introduce legislation that would require companies to meet conditions—such as paying a $15 minimum wage and providing certain health care benefits, including paid sick leave—before they could repurchase shares.
Large-scale buybacks, the senators argued in a New York Times op-ed, benefit major shareholders and executives at the expense of workers, and also divert corporate spending from research and development. Experts say such a bill would be unlikely to become law and question whether, in its current form, it would have the desired effect. “I get nervous when I see legislation that attempts to fix an ill in the corporate system by just addressing one part,” says Tamara Belinfanti, a professor at New York Law School who specializes in corporate governance. She says rules limiting stock buybacks wouldn’t necessarily promp companies to deploy money in the way Schumer and Sanders want it spent.
Bu hikaye Kiplinger's Personal Finance dergisinin June 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Giriş Yap
Bu hikaye Kiplinger's Personal Finance dergisinin June 2019 sayısından alınmıştır.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Giriş Yap
FREE HELP FOR COLLEGEBOUND STUDENTS
This program’s mentors assist applicants as they fill out the FAFSA, write essays and more.
WHAT YOU SHOULD KNOW ABOUT SPOUSAL IRAS
You typically need earned income to contribute to an individual retirement account, but a spousal IRA provides an important exception to this rule.
SELLING SHARES? HERE'S HOW TO MINIMIZE TAXES ON YOUR GAINS
ET'S say you've been regularly buying shares in a booming tech company over the past few years, but now you want to start taking some of those profits, perhaps to rebalance your portfolio.
Strategies for Novice Investors
AS part of a lifes kills program for young, single mothers, I was asked to teach a class on how to get on top of your finances.
ANSWERS TO YOUR 529 PLAN QUESTIONS
Thanks to recent policy changes, families have more options for what to do with money sitting in these tax-advantaged accounts.
Rate-Cut Winners and Losers
NOW that the Federal Reserve has cracked the interest rate ice, the next development will be to separate winners from losers.
SHOULD YOU BUY THESE RED-HOT FUNDS?
Covered-call ETFs are popular but come with plenty of caveats.
DIVIDEND STOCKS ARE READY TO REBOUND
Our favorite dividend payers are poised to benefit as falling interest rates lure investors back.
IS A 55+ COMMUNITY RIGHT FOR YOU?
These age-restricted developments appeal to older adults seeking abundant amenities and an active lifestyle.
AT LONG LAST, RATES ARE DROPPING
Consider these portfolio moves now that the Federal Reserve has cut its benchmark interest rate.