When shares of stock are repurchased by the issuing company, it reduces the number of outstanding shares and raises the earnings-per-share ratio, which can help boost the stock price. After a significant corporate tax cut was enacted at the end of 2017, S&P 500 stock buybacks surged — and a new record was set in 2022. It’s yet to be seen how a 1% excise tax on net buybacks that started in 2023 will affect buyback activity going forward.
0.51% – Estimated reduction in the 2022 proforma operating earnings of S&P 500 companies that would have resulted from the net buyback tax had it been in effect.
Source: S&P Dow Jones Indices, 2023
Source: S&P Dow Jones Indices, 2023
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