Buyback Yield in the U.S. Market

Buybacks are the hot topic. I’ve written before that buybacks can be very good under certain conditions (cheap valuations, high earnings quality, not funded by new debt issuance), but they can be very bad too (especially when the stock is expensive). 

Many are saying buybacks are evil because spending on buybacks is stifling spending on R&D, capital expenditures, and other growth propellants. Point taken. But buyback spending isn’t all that outrageous today.

Because I was curious, I checked to see what the current “buyback yield” (gross buybacks divided by market cap) was in the U.S. by sector and overall.

Below is a chart showing that we are still a ways off the buyback peak (frenzy) of 2007, when U.S. companies were buying back the equivalent of nearly 6% of their total market cap over a twelve month period (we are below 3% today). 

Calculation Note: This is simply a sum of all gross buybacks divided by total market cap for all U.S. stocks (with a market cap above $200MM). Same calculation is done for each sector and rolled up. Gross buyback data is from the statement of (financing) cash flows.