1. Trends & External Forces

As Pandemic Wanes, US Public Companies Prepare To Reward Investors

The Wall Street Journal reports that “companies across industries have been buying back stock and raising dividends at a brisk pace this year. That is a sharp reversal from 2020, when they suspended or cut such programs, warning of the urgent need to preserve liquidity in the early stages of the Covid-19 pandemic.

“Already this year, U.S. companies have authorized $504 billion of share repurchases, according to Goldman Sachs Group data through May 7, the most during that period in at least 22 years. The pace of announcements trounces even the 2018 bonanza that followed the sweeping tax overhaul of late 2017.”

The Journal goes on: “The increased desire among companies to spend comes as the U.S. economy is edging toward normalcy, and as executives are deciding how to deploy the cash hoard they amassed last year … In recent weeks, executives at companies ranging from Apple Inc. to Advance Auto Parts Inc. have unveiled plans for share repurchases or dividends – with many citing excess cash on their balance sheets, as well as confidence ahead.”

KC’s View:
It will be interesting to see the degree to which this impulse occurs in the retailing sector, and then the inevitable blowback that will come from labor interests concerned about wages. The argument will be that investors are being rewarded on the backs of low-wage front-line employees … which will further fuel the ongoing debate about income inequality.

This is a debate that will not subside … witness this story from Bloomberg about Kroger CEO Rodney McMullen:

“In early 2020, as the coronavirus swept across the U.S., McMullen announced a $2 hourly hazard increase, or Hero Bonus, for store and warehouse workers. Two months later, the company ended the raise — even as critics pointed out that the hazard remained.

“McMullen, meanwhile, collected a $22.4-million pay package for 2020 — his largest haul since he became Kroger’s boss in 2014.

“The package, disclosed Thursday in a regulatory filing, rose almost 6% from the prior year thanks to a bigger bonus, a larger package of stock awards and a salary increase.

“Pay for Kroger’s median employee fell 8% to $24,617.

“McMullen, a Kroger lifer, is one of many CEOs who saw their pay jump last year even as the pandemic roiled the U.S. economy and drove millions into unemployment. The typical company in the Russell 1000, an index of larger corporations, reported CEO compensation up 3% last year, according to data compiled by Bloomberg that is derived from filings available as of April 30.”

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