Buybacks, or the repurchase of a company’s own shares, have long been recognized as a powerful tool for corporate growth. In recent years, however, the practice has gained renewed attention and popularity, with many companies leveraging buybacks to boost their share price and reward shareholders. According to a recent chart from UBS, buybacks are set to restart the engines, with a projected $1 trillion in shares to be repurchased in the coming years.

So, what exactly are buybacks, and how do they work? Simply put, a buyback is when a company purchases its own shares from the market. This can be done through a variety of methods, including open-market purchases or tender offers. Once the shares are repurchased, they are either cancelled or held as treasury shares, reducing the total number of outstanding shares in the market and increasing the value of each remaining share.

The benefits of buybacks for companies are numerous. For one, it can help to offset the dilutive effect of stock options and other equity compensation plans. By repurchasing shares, companies can reduce the number of outstanding shares and increase the value of each remaining share, which can lead to higher earnings per share (EPS) and a more attractive valuation for investors. Additionally, buybacks can help to signal to investors that the company has confidence in its future growth prospects and is willing to invest in itself.

But buybacks are not just beneficial for companies; they can also be rewarding for shareholders. By repurchasing shares, companies can increase the value of each remaining share, which can lead to higher stock prices and increased wealth for investors. Additionally, buybacks can help to reduce the overall number of outstanding shares, which can make it easier for investors to trade and liquidate their positions.

So, why are buybacks set to restart the engines? According to UBS, a projected $1 trillion in shares is expected to be repurchased in the coming years. This is a significant increase from recent years, when buyback activity was relatively subdued due to a variety of factors, including the global financial crisis and regulatory changes. However, with economic growth stabilizing and corporate profits recovering, companies are once again turning to buybacks as a means of boosting their share price and rewarding shareholders.

Buybacks are a powerful tool for corporate growth and can be highly beneficial for both companies and shareholders. With $1 trillion in shares expected to be repurchased in the coming years, it appears that buybacks are set to restart the engines and drive corporate growth in the years ahead. Whether you’re a seasoned investor or just starting out, understanding the benefits of buybacks can help you make more informed investment decisions and potentially reap the rewards of this powerful growth strategy.