Displaying items by tag: buybacks

(New York)

After a lot of talking, the long awaited hypothesis that tax cuts at the federal level would lead to more dividends and buybacks is actually proving true. More than 20% of companies have raised their dividend so far this year, with none cutting them, the first time that has happened since 2011. The hikes are also getting bigger, averaging 14% this year. The downside for the economy is that while tax cuts have also led to buybacks, they have not flowed into increased corporate spending and investment.

FINSUM: This is very good news for shareholders, but it does put a damper on hopes that the tax cuts may spur economic growth through corporate investment.

(New York)

Stock investors may be in for some big upside surprises while bond investors’ hearts may sink. The new tax regime may have a major unintended consequence for bond markets. With the new lower corporate tax rate, many multinationals are likely to repatriate hundreds of billions of Dollars. For the last several years, much of that money has been parked in Treasuries and other bonds. But with the ability and likelihood of reshoring, companies are likely to pull huge amounts of capital out of bonds and put it into stock buybacks and dividends. This could be a big plus for equities, but bond markets could sink as massive amounts of capital are withdrawn.

FINSUM: This is the first convincing argument we have heard for why any fundamental force, outside of the Fed, could bring about a bond bear market.

(San Francisco)

While they are far from young or immature businesses, so-called FNAG stocks have all stuck to the current entrepreneurial mantra of not paying a dividend. That may be about to change as Facebook may soon be compelled to start issuing one. The company has 2 bn users and is reaching the limits of its growth potential. If headline growth starts to slow, which it almost inevitably will, expect investors to start demanding dividends and buybacks. Non FANG, but closely related stocks, such as Apple, Microsoft, and Intel, are all paying or raising dividends.

FINSUM: Dividends and buybacks would be a very positive driver for Facebook’s stock price, especially if they started before growth began to wane.