MW 20 companies in the S&P 500 whose investors have gained the greatest rewards from stock buybacks
By Philip van Doorn
These companies have reduced their share counts the most over the past 10 years
Sometimes corporate boards of directors are criticized for spending a lot of their companies' money on stock buybacks. Repurchasing stock can lower the share count and raise earnings per share. But buybacks might also be seen to be a waste of money if a company's share price is high.
What investors need to know is that buybacks aren't always in their best interests. If a company hands large amounts of newly issued shares to executives as part of their compensation, the share count increases and earnings per share decline. Money a company spends to buy back stock might be called a "return of capital to shareholders," but this term is misapplied if the buybacks only serve to limit the dilution caused by the creation of new shares for compensation.
We can only say buybacks are benefiting nonexecutive shareholders if a company's share count is being reduced.
So investors need to look every quarter at how much a company's diluted share count has changed. This is the amount of shares used each quarter to calculate earnings per share. We can only say the buybacks are benefiting nonexecutive shareholders if the share count is being reduced.
Another reason buybacks might not always be the best use of a company's earnings is that the money might be better spent on expanding or improving the business. Or maybe the company's share price has risen so much that the timing of immediate buybacks would be unfavorable.
In his annual letter to shareholders for 2021 that was included in the company's annual report, Berkshire Hathaway Chief Executive Warren Buffett wrote the following when discussing share repurchases, and the italics were his: "We don't want to overpay for the shares of other companies, and it would be value-destroying if we were to overpay when we are buying Berkshire."
In the same shareholder letter Buffett used Apple Inc. $(AAPL)$ as an example to underscore the importance of buybacks within Berkshire's portfolio of stocks. He wrote that, at the end of 2021, Berkshire's ownership position in Apple had increased to a "mere" 5.55% stake from 5.39% a year earlier. He continued: "That increase sounds like small potatoes. But consider that each 0.1% of Apple's 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple's repurchases did the job."
'We don't want to overpay for the shares of other companies, and it would be value-destroying if we were to overpay when we are buying Berkshire.'Warren Buffett
Over the 10-year period through its most recent fiscal quarter ended March 29, Apple spent $697.7 billion on stock buybacks, and its average quarterly share count used to calculate EPS had declined by 35%, according to data provided by FactSet. Meanwhile, Apple's stock had returned 586% with dividends reinvested.
The buyback math
When a company reduces its share count, the effect on the company's earnings per share has been greater. Here is an example:
-- A company's profit is $1,000.
-- There are 100 shares.
-- Earnings per share come to $10.
If we reduced the share count by 10%:
-- The company's profit would still be $1,000.
-- There would be 90 shares.
-- EPS would be $11.11.
-- EPS would have increased 11%.
What about Apple, for which the diluted share count has declined by 35% over the past 10 years? We can use that reduction to continue with our example, going back to the original 100 shares.
If we reduced the share count by 35%:
-- The company's profit would still be $1,000.
-- There would be 65 shares.
-- EPS would be $15.38.
-- EPS would have increased 54%.
It is fair to say Apple has increased EPS by 54% over the past 10 years through share buybacks, all things being equal. In case you are wondering, while the company spent $697.7 billion on buybacks over that period, its stock-based compensation totaled $72.7 billion.
A buyback screen
Among the S&P 500 SPX, 468 companies have been publicly listed for at least 10 years, and FactSet has data for changes in share counts for 465 of them.
Among the 465 companies, 82 have spent at least $20 billion on stock buybacks over the past 10 years. These 20 have reduced share counts the most:
HCA Healthcare Inc. Ticker 10-year change in share count Dollars spend on buybacks over past 10 years ($mil) 10-year total return EBay Inc. EBAY -61% $36,514 239% American International Group Inc. AIG -57% $48,190 74% HP Inc. HPQ -48% $24,231 130% AutoZone Inc. AZO -47% $22,855 435% McKesson Corp. MCK -47% $23,027 235% O'Reilly Automotive Inc. ORLY -44% $21,457 489% Marathon Petroleum Corp. MPC -43% $46,839 355% HCA Healthcare Inc HCA -43% $37,378 374% Lowe's Cos. Inc. LOW -41% $59,599 265% General Motors Co. GM -41% $30,658 71% MetLife Inc. MET -40% $26,930 119% Biogen Inc. BIIB -38% $26,815 -65% Booking Holdings Inc. BKNG -37% $44,847 361% Citigroup Inc. C -37% $66,236 81% Wells Fargo & Co. WFC -37% $128,755 69% CSX Corp. CSX -36% $26,560 223% Oracle Corp. ORCL -36% $120,772 441% Apple Inc. AAPL -35% $697,707 586% Bank of New York Mellon Corp. BK -35% $26,139 168% Applied Materials Inc. AMAT -35% $31,589 907% Source: FactSet
Click the ticker symbols for more about each company.
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-Philip van Doorn
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June 18, 2025 11:13 ET (15:13 GMT)
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