Page 9 of the 12/26/16 issue of Barron’s (see here) discussed share buybacks in the third quarter in the S&P 500. The S&P 500 companies bought back $116B of stock during the period, which was a 28% drop below Q3 2015 according to Factset. It turns out that utilities were a minuscule contributor to the Q3 total, with only $290M worth of shares repurchased among the 28 names in the index. In fact it was even worse than that, because $275M of the purchases were between Exelon and Entergy, and these were purchases of the companies’ preferred stock, not the common. The Exelon preferreds were at its BGE subsidiary, while the Entergy preferreds were at the Entergy Arkansas subsidiary.
The third quarter of 2015 had $830M in stock repurchases utility companies, meaning there was a 65% reduction by utility stocks this year. However, as in Q3 2016, preferreds were a substantial piece of the Q3 2015 repurchases. Entergy again was a big preferred repurchaser, buying back $94m from Entergy Louisiana and Entergy Gulf States. Edison International also bought back $325M of preferreds.
A big part of the discussion in the Barrons article was that if taxes change on repatriated cash, that there could be a corresponding increase in stock buybacks. With the utilities in the S&P 500 primarily focused on the US, this type of rule change could hurt utility sector performance vs. other groups in 2017. PPL with its substantial UK holdings, and AES with its holdings throughout the world would seem to be the S&P 500 utility names with the best chance to benefit from changes in repatriation rules.