Buybacks Hit Record in First Half of Year. These Stocks Are Benefiting the Most.

Ebay is among the companies that made Goldman Sachs’ list of buyback aristocrats. (INA FASSBENDER/AFP via Getty Images)

The latest sign that this bull market could be getting a little long in the tooth is that companies are less willing to pay up for their own shares.

While companies bought back a lot of their stock earlier this year, the pace of repurchases slowed in the second quarter. It was flat from a year ago, according to data from Goldman Sachs.

What’s more, the Goldman strategists noted in a report late Monday that the so-called buyback yield—the amount of repurchases over the past 12 months for S&P 500 companies divided by the market value of the index at the start of that time—is near a historically low level.

At a current 2%, the figure is below the average of 2.6% since 2005. It is the lowest percentage in two decades, not counting the 2008-2009 financial crisis and the economic slump brought on by Covid-19, according to the bank.

The decreased support from large American companies for their own stocks could be a problem if the trend continues, the Goldman strategists warn. “Weakening buybacks also indicate less share price support from corporate demand, including the downside cushion buybacks often provide during drawdowns,” they wrote.

But there is good news. The recent buyback slowdown could be temporary. The Goldman strategists estimate that the amount of S&P 500 buybacks will rise by 12% in 2026 to $1.2 trillion. That would help stabilize the index’s buyback yield.

Companies are likely to be more aggressive as long as corporate profits continue to rise at a healthy clip. Stimulus from the government could provide a boost too.

“Healthy earnings growth is the most important tailwind for buybacks. A boost to cash flows from recent fiscal legislation should also help lift repurchases,” the Goldman strategists said.

So how should investors play a potential buyback bounce? The Goldman team had a list of companies that have been fairly aggressive repurchasers of stock during the past decade.

This list of so-called buyback aristocrats includes companies that have lowered their share counts by at least 1% in either nine or all ten of the past ten years, as well as reducing their share counts on a net basis during that stretch.

Dialysis services provider DaVita, a longtime holding of Warren Buffett’s Berkshire Hathaway , was one of the top stocks on the buyback aristocrat list. It had an average annual decline of 9% in its share count over the past ten years.

Several other Berkshire investments, including Apple, American Express, Bank of America, Domino’s Pizza, Mastercard, and Visa also made the cut. So did AutoZone , Best Buy , Citigroup, eBay , JPMorgan Chase , Lowe’s, and Mondelez.

Goldman said that the 54 stocks on its buyback aristocrat list are cheaper than the broader market, with a median forward price-to-earnings ratio of 18 versus 20 for the average S&P 500 stock. They also have a higher annualized return: It came in at 15% over the past decade for the buyback aristocrats compared with 12% for the stocks in the S&P 500.

The question now, as merger activity starts to heat up again, may be whether the megacaps of the S&P 500 will continue repurchasing shares at such a healthy clip. Many large businesses have enough wherewithal on their balance sheets to buy back stock, pursue deals, pay dividends, and invest in research and development as well.

But investors should continue to keep an eye on the companies that use cash opportunistically to buy back their own shares. They tend to outperform their stingier peers.