U.S. businesses authorized more than $870 billion in share buybacks this year.
That means companies are using extra cash to buy back their own stock. With fewer shares outstanding, every dollar of profit leads to more earnings per share.
Share buybacks also help companies pay bigger dividends. Think of a company with $1 million earmarked for dividends. If a share buyback program leaves fewer shares outstanding, each share gets a bigger slice of the dividend pie!
Earlier this week we asked the question: Are share buybacks really helping YOUR profits?
The answer depends on a number of things. How much is the company paying for shares? What is the company’s financial position after the share buybacks? And what could the company be doing with the money instead of repurchasing the shares.
All important things to be considering as we head into the last earnings season of 2021.
Today’s links include new data on inflation, projections for holiday spending, an impressive Bitcoin rebound and more!
Links for Thursday, October 14th, 2021
- Reuters: Powell’s Inflation albatross grows heavier.
- “transitory” inflation argument is getting harder to defend.
- Powell’s 4-year term is up in February.
- FT: US covid cases drop by 22% – worst may be over.
- Covid has killed just over 1 in 500 Americans.
- Covid cases down 22% in past 2 weeks, hospitalizations down by 1/5.
- Number of deaths also falling.
- WSJ: Fed firms up tapering plan.
- Prepares to reduce bond purchases next month, end program by mid-2022.
- Could reduce purchases by $15B a month – divided between MBS and Treasuries.
- Minutes showed several participants preferred to reduce purchases even faster.
- Reuters: U.S. home heating bills to surge this winter.
- Energy prices are rising worldwide – power crunches in large economies.
- Nearly 1/2 of US households rely on natural gas for heat, 40% use electricity.
- Bloomberg: Social Security benefits to increase by most in 40 years.
- Social Security and Supplemental Security income to rise by 5.9% in 2022.
- The higher payments could deplete Social Security’s trust fund a year earlier.
- Axios: Consumers have cash – but less to buy this season.
- Supply chain bottlenecks getting worse, not better.
- Consumers say they will spend average of $1,447 this season – up 20%.
- Some U.S. retailers chartering own ships and using air freight.
- Reuters: Chinese property firms suffer fresh downgrades.
- Evergrande has more than $300 billion in liabilities and 1,300 real estate projects.
- S&P Global downgraded two of the sector’s bigger firms.
- $5T property sector is about 1/4 of Chinese economy.
- Coindesk: Bitcoin recovering its near 50% drawdown.
- Decline in miner outflows tends to be a bullish price indicator.
- Bitcoin volatility may subside over time as traders use stablecoins / fiat as collateral.
- Reuters: US largest bitcoin mining center after China crackdown.
- The U.S. now accounts for 35.4% of global hash rate.
- Russia’s low energy costs / cool climate are attractive for mining.
- Reuters: China’s rust belt provinces warn of power shortages.
- Analysts forecasting 12% drop in industrial power consumption (short coal supply).
- Orders to curb power usage have been put in place.
- 60 coal mines in Shanxi have been closed, railway lines disrupted due to flooding.
- Reuters: 2021 U.S. crude output lower than previously expected.
- Output will drop 260,000 barrels per day – but rebound 11.73 million bpd in 2022.
- Demand expectations also downgraded by EIA.
- FT: US Share buybacks continue to surge.
- Businesses authorized more than $870B of repurchases this year.
- Corporate America flush with cash and looking for ways to use it.
- Dividend payments hit record high in Q3 – should rise in Q4.
- Snippet: Companies who use simple language have higher returns.
- Communicating clearly with investors has a true economic benefit.
- Bloomberg: JPM reports record M&A revenue, but weak loan growth.
- Fees from advising on deals almost tripled in Q3.
- Consumer loans down 2% and commercial loans down 5%.
- JPM reported $3.3b in investment banking fees.
- IBD: Airline stocks hit by rising fuel costs.
- DAL expecting modest Q4 loss due to rising fuel costs.
- Business travel still lags recovery in leisure travel.
- DAL has ability to achieve 2019-level capacity by 2nd half of next year.
