Stock buybacks are becoming increasingly common outside the United States
US companies typically buy back stock heavily. But stock buybacks are also becoming significantly more common in other markets in 2023.
Source: Schroders
Through share buybacks, companies return excess capital to shareholders. They are less mandatory than dividend increases, and offer some investors tax advantages.
Businesses can use buybacks to improve their profits per address number. Stock buybacks are also criticized because companies can also use the money for investments. The United States imposed a 1% tax on the value of buybacks in early 2023.
Last year, according to calculations by asset management company Schroders, 38% of companies included in the MSCI US index still bought back at least 1% of their shares – still leading the world, but also down significantly compared to the previous year, as it shows Graphics above.
Companies in the UK have almost caught up with the US, but share buybacks have also become significantly more popular in Japan, France and Germany. Lower valuations in non-U.S. markets tend to make buybacks more attractive to companies.
At Schroders, the trend is not just seen as positive. Analysts worry that more buybacks, delistings, and mergers will reduce the number of shares available for investment on exchanges.
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