Q1 2024 Buyback and Dividend Increases Point to Improving Corporate Sentiment

 | Apr 02, 2024 03:50PM ET

Last week we shared that CEO sentiment was at its highest level in a year. This week we look at further evidence that corporations are feeling more bullish on economic conditions in 2024 than they were in 2023. This time in the form of dividend and buyback announcements.

Share repurchases and dividend payouts are the two primary vehicles that companies use to return value to shareholders, and both saw meaningful increases in Q1. Buybacks and dividend increases dampened in 2023 as companies remained cautious in the face of higher interest rates, stubbornly elevated levels of inflation and the threat of an impending recession. Unsure of whether a soft-landing was in store for the US, companies held back on returning excess profits to investors.

h2 Buyback Announcements at Highest Level in Over 2 Years/h2

Buyback announcements for the first quarter of 2024 clocked in at 228, the highest level since Q4 2021 recorded 376 repurchase announcements (out of our universe of 10,000 equities). This is also the first quarter to record more than 200 repurchase announcements, with every quarter of 2022 and 2023 logging below that amount.

Buybacks are seen as a positive for investors. By reducing the number of outstanding shares, current investors will have a higher percentage of ownership. A fewer number of outstanding shares also increases the company’s earnings per share, which could in turn boost share prices (although temporarily). Buyback programs also signal that the company has excess cash on hand, and while opponents will argue that this isn’t always the best use of that cash, investors can find solace in the fact that they likely don’t need to worry about the company’s cash flow position in this scenario.