A parade of the City’s biggest names today announced share buybacks worth billions of pounds as the energy, mining, defence and property sectors cash in on the global economic rebound from the pandemic.
Oil giant Shell led the way, announcing it will buy up $2billion (£1.4billion) of its own shares by 2022 as it reported second-quarter profits of $5.5billion. It also increased its dividend by 40%, from 17 cents a share to 24 cents.
The move comes a year after Shell cut payouts - an unprecedented step in peacetime - as the price of oil collapsed, briefly going negative in the US. Brent crude is now back to nearly $75-a-barrel.
CEO Ben van Beurden said: “We are stepping up our shareholder distributions today, increasing dividends and starting share buybacks, while we continue to invest for the future of energy.”
The link between the dividend and Shell’s drive to hit net-zero by 2050 will be key to its future: the business must keep shareholders on board as it invests billions in the energy transition.
Shell’s vote of confidence in itself was reflected in the City, where shares leapt 3.9% to 1452.60p.
Anglo American also cheered investors after reporting the highest interim profit in its 100-year history, fuelled by the commodities boom.
The FTSE 100 mining giant announced a $1billion share buyback alongside $3.1billion in dividends, as first-half profits rocketed on the spike in demand for copper and iron ore. Underlying earnings surged to $12.1 billion, up from $3.4 billion a year earlier.
Anglo is the most diversified of the big miners. Its De Beers diamond business reported underlying earnings of $610 million while profit at its platinum mines surged more than seven-fold to $4.38 billion.
CEO Mark Cutifani said: “I still don’t think it’s our finest hour, that is yet to come... but it’s a good milestone.”
Anglo’s shares climbed by 5% to 3278.0p, the highest level since 2008.
Defence contractor BAE Systems meanwhile announced a new £500 million buy-back programme as it too reported stellar half-year results, with sales up 6% to £10billion taking underlying profits to £1billion.
Morgan Stanley will oversee the purchases over the next 12 months.
BAE, which supplies electronic systems for F-35 fighter jets and submarines, will also hike its dividend to 9.9p, 5% up on last year’s interim payout.
Its shares have risen 12% this year and jumped another 2.8% today to 576.80p.
Foxtons also joined the buyback party, announcing a £3million share sweep-up as it swung to profitability on the back of booming property prices.
The London-centric estate agent posted a pre-tax profit of £3.3m on revenue of £66.9million for the six months to June 30, up 29% against 2019.
Foxtons, whose chairman Ian Barlow stepped down amid activist investor pressure over the group’s performance, will also pay a dividend of 18p per share.
Susannah Streeter at Hargreaves Lansdown said: “’Companies had battened down the hatches during the pandemic, filling war chests through rights issues and suspending dividends to fight the incoming storm.
“Now it’s subsided, investors are being rewarded for their patience and for hanging in there as the going got tough. The share buy backs are an indicator of surge in confidence that the economic ship has now steadied and better days have arrived. It also could be a sign that the UK stock market remains lowly valued in companies’ eyes.
“However, there could still be clouds on the horizon for companies significantly upping shareholder returns.
“Cash may be flowing freely once again, but Shell still needs to grapple with the painful and costly transition to green energy, while Foxtons may have to cope with the red hot housing market cooling off quickly, so some investors might still welcome a slightly more cautious approach.’’