Updates with post on share buybacks
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WHICH COMPANIES DO BEST WHEN THEY ANNOUNCE A SHARE BUYBACK?
A share buyback program is one of the many ways a company effectively returns capital to its shareholders, but the impact on its share price is not always the same and varies based on its sector and size, Trivariate Research data showed.
When divided across industries, shares of companies that fall under the household durables category are some of the most successful. Others include construction and engineering and capital markets.
Household durables includes top homebuilders D.R. Horton DHI.N and Lennar LEN.N and it has a one-year median return of 3.4% after a buyback announcement, Trivariate data showed starting from 1999 to September-end 2025.
Capital markets include lenders Goldman Sachs GS.N and Morgan Stanley MS.N and the group has a media relative one-year return of 7%.
Some of the laggards include chemicals, IT services and leisure products, all seeing negative median returns.
"It makes sense to us that in more cyclical businesses well-timed buybacks can be effective," Trivariate Research analysts led by founder Adam Parker said in a note.
When classified based on quality, data showed junk stocks that announce a buyback outperformed high-quality stocks over a three-year period after the initial announcement.
Another way to give back to investors is through dividends, though companies that announce a stock repurchase plan and do not pay a dividend go on to outperform their industry group by an average of 8.3% over the next three years, compared to 1.6% for those that pay a dividend.
"Our view is that companies with a dividend that think their stock is quite cheap should do an (Accelerated Share Repurchase) ASR or announce a much larger total authorization for a regular buyback to drive performance," Trivariate said.
ASR plans see the largest one-day market reaction to the announcement, followed by vanilla market repurchases, fixed-price buybacks, and negotiated buybacks.
(Shashwat Chauhan)
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