Fewer companies are planning on buying back their shares as the uncertain economic environment has left firms eager to hold on to their cash.
That’s part of a larger, steady decline. The four-month moving average of quarterly buyback announcements has declined to around 150, from above 200 in the comparable year-ago period, and down from a postpandemic peak of almost 350 in late 2021. First off, companies are facing higher interest rates, which are pushing up corporate borrowing costs and putting the focus on balance sheets. That is pressuring firms to conserve their cash and think twice about buying back stock.
Newsletter Sign-up Buybacks are great when companies are sitting on excess cash because they reduce the number of shares outstanding—thus increasing the profits each remaining shareholder receives. But when companies have smaller cash piles, they tend to tighten their belts, including when it comes to giving money back to shareholders.