According to Goldman Sachs' strategist David Kosten, share repurchases will increase 18% to more than $700 billion this year. But will the trend continue in 2016? While history suggests that increasing interest rates are not a reason to fear the end of share buybacks, running out of money and slowing growth may be.
Will 2015 mark the end of the great stock buyback binge?
By Chris Matthews at Fortune
Many companies are propping up their stock prices with buybacks, but don’t expect the party to last forever.
Many forces have fueled the bull market we have witnessed over the past six years, but share repurchases are at the top of the list. Driven by low interest rates and an economy rife with uncertainty, Corporate America is awash with cash. Rather than spend that money on internal investments that might not pan out, companies have instead decided to return that money to shareholders by buying their own stock.
The debate over whether it’s better for firms to send money to shareholders in the form of buybacks or in the form of dividends has gone on for decades. But we can all agree that companies ramping up their share repurchasing has buoyed stock prices. This chart from Bianco Research shows how buybacks have soared since the end of the recession and are now close to all-time highs:
Keep reading: Will 2015 mark the end of the great stock buyback binge?
Stock buyback zeal undimmed by prospects for fed rate hike
By Rodrigo Campos, Business Insider
NEW YORK (Reuters) – The seemingly insatiable appetite of companies for their own stock is unlikely to be satisfied soon, even if the U.S. Federal Reserve begins to hike benchmark interest rates and shares get pricier.
That would extend a pattern established in the last round of Fed tightening, according to a Reuters analysis of historical data. Many market analysts expect that higher borrowing costs won't derail the buyback boom that has been bolstering stocks.
Buybacks may lift earnings per share of companies in the Standard & Poor's 500 index by between 1.5 and 2 percentage points this year, according to estimates from Voya Investment Management in New York. With earnings estimates now calling for 1.5 percent growth for all of 2015, buybacks could make the difference between positive and negative growth in S&P 500 EPS.
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The S&P 500 buyback index , which includes the top 100 stocks with the highest buyback ratios in the benchmark, has outperformed the S&P 500 for seven years in a row.
Read more: Stock buyback zeal undimmed by prospects for fed rate hike – Business Insider.
