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Trillions of dollars stashed by U.S. and European companies during the coronavirus pandemic are starting to flow to shareholders, largely through buybacks, after a 2020 drought.

Buyback announcements came thick and fast with first-quarter results, with multibillion-dollar programs from Apple Inc. and Alphabet Inc. stealing the limelight.

Analysts note a buyback rebound in Europe, too, ranging from Maersk and Unilever PLC to Carrefour SA, which is planning its first in a decade.

About US$360-billion in buybacks were announced in the first four months of 2021, versus US$190-billion in the same year-ago period, JPMorgan strategist Nikolaos Panigirtzoglou said.

U.S. buybacks accounted for US$300-billion, Panigirtzoglou said, up from US$130-billion a year ago.

“We are seeing buyback activity almost doubling relative to 2020. Annualizing that, we get a full-year figure of $900-million for the United States which is what we saw in 2019.”

The announcements could prove a key source of support for markets, by decreasing the number of a shares outstanding, buybacks boost earnings per share and drive down the price-to-earnings ratio, a valuation measure.

The S&P 500 buyback index is up 22 per cent year-to-date, trumping the main benchmark’s 12-per-cent gain.

Analysts attribute the buyback rebound to corporate cashpiles that stem from last year’s record borrowing and cuts to shareholder rewards. Cumulative holdings of cash and cash equivalents rose by roughly US$3-trillion at S&P 500 and STOXX 600 companies, compared to 2019, Refinitiv data show. Some banks say European firms, known to favour dividends for returning cash to investors, may also shift to buybacks which are widely credited for driving U.S. equity outperformance.

“A step change in buyback activity would likely encourage U.S. and global investors to re-engage with Europe on the grounds of greater corporate focus on perceived shareholder-friendly activity,” Morgan Stanley’s Ross MacDonald wrote.

Société Générale analysts predict European share buybacks at 150 billion euros (US$182-billion) in 2022 and 190 billion euros the year after. In 2019, buybacks totalled roughly US$100-billion.

JPMorgan’s Mr. Panigirtzoglou does not, however, expect buybacks to breach the 2018 global record of US$1.2-trillion, unless the coming months bring a market correction. Selloffs in 2015 and 2018 prompted companies to snap up newly cheap shares, he noted.

Buybacks generally recover quicker than dividends after a crisis. But while Refinitiv I/B/E/S data show U.S. dividends fully recovering over the coming year, European payouts are expected at US$276-billion, still US$40-billion off pre-COVID peaks.

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