Barclays: Europe saw steady buyback activity in May

Buyback announcements in Europe surged to €38 billion in May, although have remained below the average since 2017, Barclays strategists said in a note.

The strongest activity was noted in the Financials, Energy, and Consumer Discretionary sectors, with these sectors running 1.5 to 2 times above the third quartile over the past three months. However, only Financials and Consumer Discretionary sectors showed year-over-year improvement in buyback announcements.

“For the coming months we expect buyback announcements to slow somewhat given the lower average monthly amounts announced over the summer since 2017,” Barclays noted.

Buyback execution remained robust in May, with companies executing €23.4 billion, the highest since 2017. Financials and Energy sectors led in buyback execution, even though they were lower compared to the previous year. Staples and Consumer Discretionary sectors showed increased execution above the third quartile.

According to Barclays’ analysis, buybacks represented 1.7% of total stock volume in May, above the post-COVID average. Energy companies’ buybacks accounted for 5.2% of their total stock volume traded. Financials, Staples, and Consumer Discretionary sectors also saw significant buyback volumes.

Utilities, Materials, and Industrials have the most remaining buyback programs to execute, while Staples, Tech, and Financials have completed 30-40% of their programs. The buyback yield strategy has recently pulled back but still outperforms the high dividend yield strategy.

Energy, Banks, and Insurance sectors in Europe have provided the largest cash yields to shareholders, whereas Semiconductors, Healthcare Equipment, and Pharma offered the lowest yields. Regionally, OBX, PSI20, , and IBEX indices have delivered the highest cash to shareholders and buyback yields over the last 12 months.