Because of the great trading results from KDK Options, we are happy to announce that another donation to Northeastern Illinois University's College of Business is being made. This is the second donation of the year. We look forward to continuing our philanthropic adventure. Some of our philosophy is below if interested
KeaneVCC's philanthropic mission is to provide resources (financial, human, etc.) to worthy causes that advance the progress of the human experience. We donate a percentage of all revenue generated (not just profits). We do not report them on our tax donations as we feel strongly about giving these resources without receiving tax benefits in return.
Wednesday, March 27, 2019
Wednesday, March 6, 2019
What Corporations Did With Their Tax Cuts
There were a few major topics identified when we first set out to analyze the effects of the 2018 tax bill. The link to the original post can be found (here).
One major topic was how corporations would handle the extra cash coming their way. One year out, we have some evidence as to know their behavior. A recent Bloomberg story identified analysis by Citigroup that showed corporations have spent more on stock buybacks than on capital expenditures (story here). This is the first year since 2007 that this has happened.
We mentioned in our original post how wages, stock buybacks, dividends, and capital expenditures would show the intentions of the executives of US corporations. Here is some data
- Wages grew 3.2% in 2018. That is the highest annual gain in a decade. CNBC story here.
- Stock buybacks increased to over $800 billion. That is an increase of 60% over the 2017 total of $500 billion. This happened with a stock market that ended the year 5% to the downside. (Bloomberg)
- Capital Expenditures increased $100 billion from $600 billion to $700 billion. (Bloomberg)
- Dividends increased 10% to $450 billion from $400 billion in 2017 (Bloomberg)
These numbers tell a strong story about how corporations used the extra revenue from the tax cut. It is not a healthy story. A higher than normal percentage was dedicated to buybacks. On the one hand, having that as the reason for rising earnings and stock prices is not a long term recipe for success for investors. Corporate America used the tax cut to buyback stock to boost earnings per share that inflated bonuses while wage growth was a paltry 3%. On the other hand, it is positive news for all those execs whose bonuses are tied to earnings. It also stemmed the slide in the stock market.
Corporate America needs to take the infrastructure opportunity coming and invest those tax dollars in its employees and products.
** This blog is used for opinions and ideas and should not be used as a direction to act without doing your due diligence.**
One major topic was how corporations would handle the extra cash coming their way. One year out, we have some evidence as to know their behavior. A recent Bloomberg story identified analysis by Citigroup that showed corporations have spent more on stock buybacks than on capital expenditures (story here). This is the first year since 2007 that this has happened.
We mentioned in our original post how wages, stock buybacks, dividends, and capital expenditures would show the intentions of the executives of US corporations. Here is some data
- Wages grew 3.2% in 2018. That is the highest annual gain in a decade. CNBC story here.
- Stock buybacks increased to over $800 billion. That is an increase of 60% over the 2017 total of $500 billion. This happened with a stock market that ended the year 5% to the downside. (Bloomberg)
- Capital Expenditures increased $100 billion from $600 billion to $700 billion. (Bloomberg)
- Dividends increased 10% to $450 billion from $400 billion in 2017 (Bloomberg)
These numbers tell a strong story about how corporations used the extra revenue from the tax cut. It is not a healthy story. A higher than normal percentage was dedicated to buybacks. On the one hand, having that as the reason for rising earnings and stock prices is not a long term recipe for success for investors. Corporate America used the tax cut to buyback stock to boost earnings per share that inflated bonuses while wage growth was a paltry 3%. On the other hand, it is positive news for all those execs whose bonuses are tied to earnings. It also stemmed the slide in the stock market.
Corporate America needs to take the infrastructure opportunity coming and invest those tax dollars in its employees and products.
** This blog is used for opinions and ideas and should not be used as a direction to act without doing your due diligence.**
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