In this article, we take a look at 15 companies that are buying back stock.
Stock buybacks and dividends are the two main ways companies return excess capital back to shareholders.
Unlike dividends which many companies pay quarterly, stock buybacks can be more flexible. If a stock’s valuation is too high or if the macroeconomic environment is too uncertain, a company’s management can decide not to buy back as many shares. If a stock’s valuation is too low or if management is very confident on future earnings, a company could buy back more stock than it usually does.
Given the wide discretion on the timing of stock buybacks, companies can cut their stock buybacks and not upset their investors as much as if they cut their regular dividends.
If a company maintains its existing level of profitability and doesn’t issue any new stock shares, stock buybacks can increase earnings per share in the long term. If earnings per share increases substantially, the company’s stock price could potentially benefit if its valuation multiple stays the same.
Stock buybacks are also more tax advantageous than dividends for the investors who have to pay taxes on dividends. The Washington Post explains, “Buybacks are far more tax efficient for companies since dividends are taxed twice — once as corporate income and again as dividends. Buybacks are only taxed once. Taxes on buybacks would have to increase dramatically — perhaps to about 10% — before it made sense for a company to declare a dividend instead.”
Although stock buybacks are tax advantageous, the tax treatment on stock buybacks will change in 2023 given the Inflation Reduction Act. According to the new law, there will be a 1% tax on the market value of net shares repurchased beginning next year. As a result of the new tax, analysts estimate some companies might pay more dividends as a result and not buy back as many shares as they would have.
Nevertheless, it is still expected that many companies will continue to use buybacks as a way to return excess capital back to shareholders.
While stock buybacks have their upsides, stock buybacks also have their drawbacks. If management buys back shares at too high of a price for the company, for example, stock buybacks could potentially destroy value rather than add value. Investors, in that case, would have been better off if management had kept the money on the balance sheet or if management had returned the excess capital with a dividend. If a company isn’t profitable, stock buybacks won’t help EPS either.
For those of you interested, check out 12 Best Dividend Paying Stocks to Buy Now.
2022
Given the potential for a recession next year, some companies are buying back less of their stock to strengthen their balance sheets.
Given the 1% tax on stock buybacks next year, other companies are buying back more stock in 2022 before the tax goes into effect.
In terms of the S&P 500 index, however, total S&P 500 buybacks in Q3 decreased 4% year over year to $210.8 billion.
Rawpixel / shutterstock.com
Methodology
For our list of companies that are buying back stock, we picked the top 15 companies that bought back shares in the S&P 500 in Q3 2022 according to the S&P Dow Jones Indices and we ranked them by their stock buybacks in the quarter.
15 Companies That Are Buying Back Their Stock
15. Morgan Stanley (NYSE:MS)
Q3 2022 Buybacks (Million): $2,608
Number of Hedge Fund Holders: 52
Leading investment bank Morgan Stanley (NYSE:MS) ranked #15 in terms of S&P 500 components which bought back stock in Q3 2022 with stock repurchases of over $2.6 billion in the quarter. Given Morgan Stanley (NYSE:MS) had net income of $2.632 billion in Q3 2022, the bank paid nearly all of its profits in the form of buybacks for the period.
With its Q3 repurchases, Morgan Stanley (NYSE:MS) bought back $11.97 billion worth of stock in the twelve months ended September 30, 2022 up from $9.28 billion worth of stock repurchases in the twelve months ended September 30, 2021.
14. ConocoPhillips (NYSE:COP)
Q3 2022 Buybacks (Million): $2,804
Number of Hedge Fund Holders: 64
Given the higher oil and gas prices this year as a result of the Russia Ukraine war, analysts expect energy company ConocoPhillips (NYSE:COP)’s EPS to surge to $14.34 in 2022 from $5.95 in 2021. In terms of future EPS, analysts expect ConocoPhillips (NYSE:COP) to earn $12.87 for 2023 and $10.95 in 2024. Given its strong earnings this year, ConocoPhillips (NYSE:COP) bought back over $2.8 billion worth of its stock in the third quarter.
13. Walmart Inc. (NYSE:WMT)
Q3 2022 Buybacks (Million): $2,961
Number of Hedge Fund Holders: 68
Walmart Inc. (NYSE:WMT) has been a big buyer of its stock in the last decade with a total buyback of $65.59 billion in the last 10 years. Compared to Walmart Inc. (NYSE:WMT)’s market capitalization of $382.58 billion as of 12/29, the buybacks represent over 17% of the retail giant’s total market capitalization. With its buybacks, Wal-Mart’s shares outstanding has declined from 3.474 billion in January 2012 to 2.711 billion in October of 2022, down 22% and helping boost EPS and the share price.
12. Cigna Corporation (NYSE:CI)
Q3 2022 Buybacks (Million): $3,500
Number of Hedge Fund Holders: 76
Health insurance giant Cigna Corporation (NYSE:CI) bought back $3.5 billion worth of its own stock in the third quarter, bringing its total buybacks to $26.26 billion in the last 10 years. Given the buybacks and favorable industry trends, shares of Cigna Corporation (NYSE:CI) have surged 44.02% year to date.
In Q3, Cigna Corporation (NYSE:CI) adjusted income from operations was $6.04 per share, up from $5.73 per share in Q3 2021. Cigna Corporation (NYSE:CI) ranks #12 on our list of companies that are buying back stock.
11. Comcast Corporation (NASDAQ:CMCSA)
Q3 2022 Buybacks (Million): $3,525
Number of Hedge Fund Holders: 73
Entertainment and communications conglomerate Comcast Corporation (NASDAQ:CMCSA) bought $3.53 billion worth of its stock in Q3, bringing its total share buybacks to $45.38 billion in the last 10 years. Given rising interest rates, valuations for dividend stocks have come under pressure as capital has moved from equities into Treasuries. Given the capital outflow and other reasons, Comcast Corporation (NASDAQ:CMCSA) shares have declined 30.36% year to date despite the buybacks.
While shares haven’t done well this year, analysts do see Comcast Corporation (NASDAQ:CMCSA)’s EPS rising with consensus earnings per share estimates of $3.59 per share in 2022, $3.75 per share in 2023, and $4.18 per share in 2024.
10. Chevron Corporation (NYSE:CVX)
Q3 2022 Buybacks (Million): $3,697
Number of Hedge Fund Holders: 66
Although it is arguably more known for being a dividend stock given its 35 consecutive years of annual dividend increases, Chevron Corporation (NYSE:CVX) is also a considerable buyer of its own stock. For the third quarter, the oil and gas company bought back $3.7 billion worth of its stock, bringing total stock buybacks in the last 10 years to $22.21 billion.
Like many other oil and gas companies, Chevron Corporation (NYSE:CVX) has benefited from higher oil and gas prices this year given the Russia Ukraine war. If there is a recession next year, the company’s profits might not be as strong.
9. NVIDIA Corporation (NASDAQ:NVDA)
Q3 2022 Buybacks (Million): $3,779
Number of Hedge Fund Holders: 89
NVIDIA Corporation (NASDAQ:NVDA) bought back $3.78 billion of shares in the third quarter, up from $3.65 billion worth of buybacks in the second quarter. Although shares of the GPU maker are down 50.35% year to date, the buybacks could help generate value for shareholders if NVIDIA Corporation (NASDAQ:NVDA) grows its EPS in the future like many analysts expect.
Of the 920 hedge funds in our database, 89 owned shares of NVIDIA Corporation (NASDAQ:NVDA), making the company a fairly widely held tech stock among elite funds. NVIDIA Corporation (NASDAQ:NVDA) ranks #9 on our list of companies that are buying back stock.
8. Marathon Petroleum Corporation (NYSE:MPC)
Q3 2022 Buybacks (Million): $3,908
Number of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) is a leading refiner that also has a midstream business. Given the higher oil and gas prices this year, analysts expect the company to earn $25.43 per share in 2022 before earning $14.30 in 2023 and $10.52 per share in 2024. Given the substantial profits in 2022, Marathon Petroleum Corporation (NYSE:MPC) has been a big buyer of its stock, buying back $3.9 billion of its own shares in Q3. Marathon Petroleum Corporation (NYSE:MPC) ranks #8 on our list of companies that are buying back stock.
7. Lowe’s Companies, Inc. (NYSE:LOW)
Q3 2022 Buybacks (Million): $3,999
Number of Hedge Fund Holders: 61
Given the rise in interest rates, the housing market has cooled and home improvement leader Lowe’s Companies, Inc. (NYSE:LOW) shares are down 21.75% year to date as a result. Nevertheless, Lowe’s Companies, Inc. (NYSE:LOW) remains a big buyer of its stock with stock repurchases of $4 billion in Q3. Despite the headwinds this year, analysts expect Lowe’s Companies, Inc. (NYSE:LOW)’s earnings to rise to $13.75 per share in 2023 and $14.05 per share in 2024 from $11.99 per share in 2022.
6. The Procter & Gamble Company (NYSE:PG)
Q3 2022 Buybacks (Million): $4,000
Number of Hedge Fund Holders: 69
While demand for consumer staples The Procter & Gamble Company (NYSE:PG) hasn’t been as strong as expected given the high inflation, the company remains a buyback and dividend leader. In Q3, The Procter & Gamble Company (NYSE:PG) bought back $4 billion worth of its own shares, ranking #6 in our list of companies that are buying back stock. In the same period, The Procter & Gamble Company (NYSE:PG) paid total dividends of $8.72 billion, which would also rank the company among the top S&P 500 companies in terms of dividends paid.
5. Exxon Mobil Corporation (NYSE:XOM)
Q3 2022 Buybacks (Million): $4,494
Number of Hedge Fund Holders: 75
Exxon Mobil Corporation (NYSE:XOM) returned a lot of capital back to shareholders in Q3 thanks to higher oil and gas prices given the Russia Ukraine war. For the period, the oil and gas leader repurchased $4.49 billion of its stock and paid total dividends of $15.17 billion. In terms of the future, analysts see Exxon Mobil Corporation (NYSE:XOM) earning $13.81 per share in 2022, $11.21 per share in 2023 and $9.86 per share in 2024.
75 hedge funds in our database owned shares of Exxon Mobil Corporation (NYSE:XOM) at the end of the third quarter.
4. Microsoft Corporation (NASDAQ:MSFT)
Q3 2022 Buybacks (Million): $5,573
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) is the most widely held stock among the elite funds we track with 269 hedge funds holding shares at the end of Q3. With share buybacks of $5.57 billion in Q3, software maker Microsoft Corporation (NASDAQ:MSFT) ranks #4 in terms of stocks among S&P 500 components in the period. Given the repurchases in the third quarter, Microsoft Corporation (NASDAQ:MSFT) has bought back over $172.13 billion worth of its own shares in the last 10 years.
3. Meta Platforms, Inc. (NASDAQ:META)
Q3 2022 Buybacks (Million): $7,365
Number of Hedge Fund Holders: 177
Although the social media leader is spending a lot of capital on building the metaverse, Meta Platforms, Inc. (NASDAQ:META) is also buying back a lot of stock. In the third quarter, Meta Platforms, Inc. (NASDAQ:META) ranked #3 among all S&P 500 components with stock buybacks of $7.37 billion in the time frame.
ClearBridge Investments commented on Meta Platforms, Inc. (NASDAQ:META) in a Q3 2022 investor letter,
We initiated a new position in Meta Platforms, Inc. (NASDAQ:META), in the communication services sector, which operates the Facebook and Instagram social media platforms and is a leading digital advertising provider. We have been carefully watching the company over the last few quarters and believe headwinds from lower monetizing in Facebook and Instagram Reels and pressures from consumer privacy measures are poised to lessen. We believe the company has begun to fully acclimate to this new environment, will achieve greater effectiveness in Reels monetization and find ways to adapt to new privacy standards which will rebound advertising efficiency. Combined with a greater focus on cost control, we believe these initiatives will help contribute to further margin expansion and leave the company well-positioned moving forward.
2. Alphabet Inc. (NASDAQ:GOOG)
Q3 2022 Buybacks (Million): $15,392
Number of Hedge Fund Holders: 156
Considering the tech leader doesn’t pay a dividend, stock buybacks have been the only way Alphabet Inc. (NASDAQ:GOOG) has returned capital back to shareholders. Given Alphabet Inc. (NASDAQ:GOOG) remains one of the most profitable companies in the world, the company ranks among the top S&P 500 components in terms of stock buybacks. In Q3, Alphabet Inc. (NASDAQ:GOOG) bought back $15.39 billion worth of its stock, bringing its ten year buyback total to $163.10 billion.
1. Apple Inc. (NASDAQ:AAPL)
Q3 2022 Buybacks (Million): $24,736
Number of Hedge Fund Holders: 140
With stock buybacks of $24.74 billion in the third quarter, Apple Inc. (NASDAQ:AAPL) ranks #1 in terms of our list of companies that are buying back stock. Given its massive buybacks, Apple Inc. (NASDAQ:AAPL) stock has performed better than some other big tech companies in 2022 although shares are still down 27.01% year to date. If Apple Inc. (NASDAQ:AAPL) can keep innovating and keep making new high margin products that customers want, the company could potentially buy a lot more of its stock in the future.
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Disclosure: None. 15 Companies That Are Buying Back Their Stock is originally published on Insider Monkey.
