US Buybacks: Identifying Winners Amid Slowing Momentum

Share buybacks have become the predominant means of corporate payout, surpassing dividends in the past two decades. The key driver for share repurchases include tax advantages, financial flexibility, and support for stock prices. In the last 15 years, the S&P 500 Buyback Index, which tracks companies with a high buyback ratio in the S&P 500, has outperformed the S&P 500 equal-weighted Index. However, buybacks fell by 22% in the first half of 2023 compared to the same period last year, as corporations reassess their capital allocation strategy in the face of slowing growth prospects. In this backdrop, we identify companies with a strong buyback track record, showcasing consistent free cash flows and a robust balance sheet that are likely to outperform the broader market in the current slowing repurchase momentum.