S&P 500 companies likely to boost share buybacks in 2019: Goldman Sachs

Companies are likely to increase their return to shareholders vide buybacks and dividends, opine strategists at Goldman Sachs.

Goldman Sachs is of the opinion, S&P 500 companies are likely to boost their cash spending by 13% to $3 trillion next year, with share buybacks expected to represent their largest usage of cash.

Of the estimated cash spending S&P 500 companies are likely to allocate 51% for investment in growth, including capital expenditures, research and development and cash acquisitions, while 49% will go towards returning cash to shareholders through buybacks and dividends, wrote strategists at Goldman Sachs.

As for this year, cash spending by S&P 500 companies are rising by 19%, their fastest pace since 2011.

The increased cash spending follows the Trump Administration’s biggest overhaul of the U.S. tax code in over 30 years.

Goldman strategists expect S&P 500 buybacks to climb by 22% to $940 billion in 2019 versus 2018’s estimated $770 billion.

Capital expenditures are expected to increase by about 9 percent from an estimated $715 billion in 2018 to $780 billion in 2019.

“In the near term, we expect companies prioritizing buybacks and dividends will continue to outperform firms investing for growth,” wrote strategists at Goldman Sachs. “Returning cash to shareholders is a winning long-term strategy and performs best when GDP growth is as strong as in 2018.”

Last week, the U.S. Commerce Department disclosed, the U.S. gross domestic product (GDP) grew at a 4.2% annualized rate in the second quarter – its fastest pace in nearly four years.

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