Minyi Chen, Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS), provides some color and analysis to the recent S&P Data released on Q1 buybacks and can discuss how to apply the data to outperform the market.

Stock buybacks S&P dow jones indices

Q1 stock buybacks: Highlights of the data

  • In Q1, ’14 companies spent an extra $30 billion more than the prior quarter on buybacks, buying more than they issued and reducing their share count.
  • The quarter became the second highest period: Q1,’14  buybacks increased 59.2% to $159.3B from Q1,’13 $100.1B
  • Companies bought a tailwind for EPS, in a quarter when they needed it most
  • Companies continue to increase their shareholders’ returns through buybacks and cash dividends, with the two expenditures combined setting a new index record at $241.2 billion in the first quarter – surpassing the prior record of  $233.2 billion set in Q3,’07

Largest q4 Stock buybacks

Minyi’s analysis:

  • Buybacks hit a second record high in Q1 à it suggests companies still have great demand to repurchase shares
  • For two reasons:

1) As the bigger part of their payout policies (companies pay out twice as much on buybacks than on dividends)
2) Greater need to offset dilution (as stock prices go higher, more options get excised)

  • TTFS is a way to play these record highs
  • Returning cash to shareholders is considered “good” corporate governance
  • Attached please find a spreadsheet with historical buybacks data to put this content into perspective. It illustrates how buybacks have grown overtime.

S&P 500 sector Stock buybacks