Companies Are Buying Back Shares at Record Levels, and Using Debt to Do So

July 29, 2019

Share buybacks are expected to hit nearly $1 trillion this year, and companies are racking up debt to fuel these repurchases. Goldman Sachs is projecting that S&P 500 companies will spend a record $940 billion buying back stocks, a 13 percent increase over last year.

The drive for share count reduction has led many companies to spend more money than they have on hand. The cost of buybacks hit 104 percent of free cash flow in the 12 months through the end of the first quarter of 2019. This means that companies’ balance sheets now have less cash and more leverage, setting up a potentially volatile situation if corporate profits continue to slow.

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