When corporations are profitable and established, they tend to return capital to shareholders. This can be achieved via stock buybacks to shrink the float and to support the stock, or it can be done via one-time dividends or by raising their annualized quarterly dividends. 24/7 Wall St. has covered may top dividend views for 2016. Now it is time to take a look at the 2016 stock buyback kings — companies that will spend the most buying back their common stock this year alone.
Many investors love the cash flow from dividends. After all, dividends can contribute up to 50% of total returns through time. Other investors prefer for companies to buy back their common stock. This can come with a lower effective tax rate for long-term gains, or they feel this can prop up the share price.
When picking out companies that will be buying back the largest number of shares in 2016, several things have to be considered. First and foremost, a company had to be willing to spend billions of dollars to buy its shares. Such companies also have to have a history of conducting stock buybacks, or they had to have a solid reason why they would be so aggressive in buying back stock this year alone.
24/7 Wall St. has screened many companies involved in share buybacks to create the list of companies that likely will repurchase the most shares in 2016. The reality is that investors will not know exactly which companies led the total stock buybacks in 2016 until early in 2017, when the companies disclose more data on their share buyback activities. That being said, these companies are all massive buyers of their own stock.
We also have compared each of these to the respective market capitalization, and have shown price and performance metrics. These are the 18 companies that will buy back the most in common stock during the calendar year 2016, and these companies alone are likely to spend a combined sum well in excess of $100 billion. In some cases, we also included direct quotes from these companies if it pointed out exactly how much or over what period they would conduct the buybacks.
The billions Apple Inc. (NASDAQ: AAPL) has spent buying back stock likely will continue beyond its current massive buyback plan. Apple spent roughly $3 billion in first quarter of fiscal 2016 at an average price of $115.45 per share and spent over $6.8 billion in the fourth quarter of 2015. Its November 2015 accelerated share repurchase period will end in or before April 2016. At December 26, 2015, Apple saw its share count drop on a diluted basis to 5.594 billion from 5.881 billion a year earlier.
Apple’s last earnings release said:
We generated operating cash flow of $27.5 billion during the quarter, and returned over $9 billion to investors through share repurchases and dividends. We have now completed $153 billion of our $200 billion capital return program.
Shares of Apple were recently trading at $94.50. The 52-week trading range is $92.00 to $134.54, and the consensus analyst price target is $135.92. As far as how the buyback matters here, Apple’s market cap is $521 billion.