According to Goldman Sachs as reported by  James Condliffe of The New York Times News Service, US companies are set to hand a record amount back to shareholders in the coming months. The report by Goldman Sachs noted by the end of July US companies had repurchased $ 754 billion of stock and that number should break the trillion dollar level by the end of the year.

When a company buyback its stock, because management believes the stock price is low, it reduces the number of shares. If earnings are similar or coming in as expected, the earnings per share increases. When the EPS increases, the multiple the stock typically trades at is low and tends to rise to meet normal expectations, thus the stock price increases.

A good part of the reason for the increase in buybacks is President Trump’s tax cut for corporations both on income tax from 35% to 21% and the lowering of taxes for companies holding money outside the US. The largest companies holding money outside the US were the tech companies and the biggest beneficiary is Apple. The company has repurchased $43.5 billion of its own stock.

Linking to dividend paying stocks, the trend of companies to buy back stocks has made large cap dividend paying stocks more valuable. Sometimes being in the right place at the right time and government helping can be rewarding. The trend is expected to last another year or until the government decides government deficits are the important to pay down.

There are more questions than answers, till the next time – to raising questions.