Shareholders have the tax cut to thank for recent returns
The Tax Cuts and Jobs Act, the biggest tax cut in over 30 years, has allowed S&P 500 companies to give back to their shareholders.
The cut, which decreased corporate income tax from 35 to 21 percent, allowed for increased stock buybacks and dividends, supplying shareholders with $1 trillion in the twelve months. Moreover, according to Dow analyst Howard Silverblatt, these figures were $428 billion in dividends and $573 billion in buybacks. Just a year prior, these numbers totaled just $939 billion; that is, the tax cut accounted for a 6.5% increase in shareholder returns.
By itself, Apple (AAPL) posted a $23.5 billion repurchase of its shares in the first quarter, its highest number of all time. In fact, this number of buybacks could have purchased Twitter, Hershey, Kroger, Snap, or Best Buy. And Apple isn’t the only firm that’s thriving; earnings per share of all S&P 500 firms rose 26% in the first quarter.
Companies are putting this added cash to good use, too. Many companies are investing this money in research and development. Q1 expenditures totaled more than $159 billion, which is a 21% year-over-year surge. Mergers and acquisitions, for example, are totaled at $2 trillion thus far, which is on pace to beat the record-high $4.7 in 2015.
While critics of the tax cut claimed that it would only help corporations and hurt the little guy, it seems that is not the case. Shareholders are reaping the benefits just as much as the highest-valued companies, and this trend will likely continue for the remainder of 2018.
Featured image via Pixabay/geralt
Comment Template