FTSE 100 businesses are on course to execute unprecedented share buybacks this year, according to the latest statement from BP. BP returned £1.2 billion in buybacks in the first period, and has now announced an additional £2 billion for the second quarter. The overall amount of share buybacks projected from FTSE 100 businesses in 2022 will be £37 billion, substantially surpassing the previous high of £34.9 billion set in 2018. Allow me to explain why I believe this is good news for investors.
When a company has excess cash to return to shareholders, it engages in share buybacks. Future profits and dividends will be distributed over fewer shares, giving each shareholder a little more each year. And, perhaps, the stock price will increase. It’s the polar opposite of dilution, which is an issue that commonly afflicts shareholders in early growth firms. To generate the required money, new firms issue new shares on a regular basis, resulting in a spread of future earnings that is becoming progressively narrower.
The value of the FTSE 100 index
Unilever, Aviva, and Lloyds are three of the firms on the table that I hold shares in. That might indicate that I’m good at identifying companies that create a lot of cash for shareholders. Or maybe I simply have a talent for spotting companies whose stock prices are about to plummet. That’s something I’ll leave up to others to determine.
However, witnessing these buyback schemes helps me cope with my fears and apprehensions. Perhaps I didn’t make a mistake when I bought these stocks for the long haul. At the very least, the corporations themselves seem to think they’re a good deal.
It’s time to purchase.
The final observation from CoinBroker is that the projected record FTSE 100 buybacks in 2022 give a ray of hope in the midst of all the negativity. It also confirms our belief that today is an excellent moment to invest in stocks for the long run.