Companies are buying more of their own shares than ever before.
Share buybacks in February from S&P 500 members surged to a record in February, according to a report by Bloomberg’s Lu Wang and Oliver Renick.
Citing data from TrimTabs Investment Research, Bloomberg reported that companies in the benchmark index announced $US104.3 billion in planned buybacks last month, they wrote.
When companies repurchase their own shares it decreases the number of shares outstanding, potentially increasing the value of the remaining shares on the market as well as future earnings per share.
Since 2009, S&P 500 companies have bought $US2 trillion of their own shares, Bloomberg noted.
And for Wall Street legend Art Cashin, this buyback activity is part of why stocks have rallied to all time highs.
Before declining in early trading on Tuesday, the Nasdaq closed above 5,000 for the first time in 15 years on Monday. The S&P 500 and the Dow also rallied to close at record highs.
In a note Tuesday, Cashin highlighted the report from Bloomberg, adding that:
“[Companies] are on a pace to spend about 95% of their earnings on buybacks and dividends. No wonder we’re at new highs.”