Companies, it seems, have had an insatiable appetite for buying back their own shares lately. It's a strategy that is a bit of a double-edged sword. It's great for shareholders as a reduced share count boosts earnings per share and almost always pops the share price. It also works out better for taxes because it's essentially a tax-free transaction (as opposed to dividends which would be taxable). On the other hand, it could be an indication that the company doesn't necessarily have any higher returning projects to invest in and instead are choosing to return the excess capital to shareholders.
Big names like Boeing (NYSE:BA), Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) have been big purchasers of their own stock lately and it's estimated that 80% or more of S&P 500 companies have bought back their own shares recently. Given the effects that it has on stock prices, it's not surprising that an ETF is attempting to jump on the trend in an attempt to deliver oversized returns.
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