Global share buybacks drop despite dividend spike
Share buybacks throughout the world dipped by 14 per cent last year to $1.1 trillion (£880bn) despite record dividend issuance from global companies.
In the UK, share buybacks totalled $64.2bn (£51.6bn), compared to $65.8bn (£52.9bn) in 2022, thanks to record bank buybacks, data from Janus Henderson’s latest annual Share Buyback study revealed.
However, 2022 was an unusually strong year for share buybacks in the UK, as they totalled $25.1bn (£20.1bn) in 2021, $12.8bn (£10.3bn) in 2020, and $32.3bn (£26bn) in 2019.
US companies issued the most share buybacks last year, adding up to $773bn (£621bn), or 70 per cent of the total bought back globally.
However, the country also made a disproportionately large cut to its buybacks, falling 17 per cent, as tech companies saw their stock prices soar. Among these, Microsoft and Meta reduced buybacks by almost one third.
Nevertheless, the value of buybacks was 1.2x larger than the value of dividends paid by US companies in 2023.
Other than the US, companies in the UK were the biggest buyers of their own shares, accounting for $1 in every $17 of the global total in 2023.
Shell embarked on the largest non-US share buyback program, totalling almost a quarter of the UK total, but still cut sharply compared to 2023.
This was the same for other large UK companies like BP, British American Tobacco and Lloyds.
However, significant increases from banks like HSBC and Barclays almost offset the cuts, meaning share buybacks only declined 2.6 per cent throughout the year.
The global buybacks were highly concentrated. While just over half of all companies worldwide bought back shares throughout the year, the 45 biggest accounted for half of the total amount spent on share buybacks.
Ben Lofthouse, head of global equity Income at Janus Henderson, said: “Many companies use buybacks as a release valve – a way of returning excess capital to shareholders without setting expectations for dividends that might not be sustainable long term. This is especially appropriate in cyclical industries like oil or banking.
“That flexibility explains why buybacks are more volatile than dividends. It also means there is no real evidence that buybacks are taking over from dividends. Meta, for example, paid its first dividend in 2024.
“Moreover, the relative size of buybacks when compared to dividends shrank in every region except Japan and emerging markets (where there are data lags). The dividend is clearly still well supported by corporates as a means of returning capital to shareholders.”