Do stock buybacks beat the market? A backtest on the S&P 500

S&P 500 companies spent close to $1 trillion buying back their own stock over the last 12 months. Does a big buyback make a stock a better buy? We tested S&P 500 companies every month from January 2018 to May 2025 on three buyback measures, then checked the 18 months after that separately.

No edgeThe companies spending the most on buybacks did about the same as the average S&P 500 stock. The biggest issuers of new stock did lag.

Months tested89

Top 10% by buyback yield, a month+0.12%

Months ahead of the average47 of 89

Biggest stock issuers, a month−0.31%

Each month we bought the 10% of S&P 500 companies with the highest buyback yield and compared them with the average member over the same month. The gap was small and swung both ways from month to month.

The rules we tested

Who: S&P 500 members on each day, including companies that later left the index.
Buyback yield: money spent on buybacks over the last 12 months, from the cash flow statement, divided by company value. Only figures already filed with the SEC count.
Each month: buy the top 10% by buyback yield at the first close of the month, hold for one month, then rebuild the list.
Judged against: the average S&P 500 member over the same days, after a 0.1% cost on every stock swapped.
Period: January 2018 to May 2025, with the 18 months after that held back and checked separately.

Top 10% by buyback yield: average result a month against the average S&P 500 stock, by year

Each bar is the average month in that year. 2025 and 2026 include the held back months; 2026 runs to November.

Three ways to measure buybacks

Buyback yield, top 10%: +0.12% a month against the average S&P 500 stock, ahead in 47 of 89 months.
Net buyback yield, after taking off stock issued to employees and for deals: +0.16% a month, ahead in 48 of 89 months.
Biggest fall in shares outstanding over 12 months: +0.10% a month, ahead in 52 of 89 months.

All three leaned slightly positive, but the swings from month to month were far larger than the average gap, so none of them could be told apart from luck.

The other side: companies issuing the most stock

The clearest result was at the other end. The 10% of S&P 500 companies issuing the most new stock, net of what they bought back, did 0.31% a month worse than the average member, about 3.7% a year, and lagged in both halves of the period.

In the held back 18 months that gap shrank to 0.10% a month, so it has been weaker lately.

The most recent 18 months

In the most recent 18 months, which we held back and checked separately, the top 10% by buyback yield did +0.05% a month against the average S&P 500 stock, ahead in 8 of 17 months. That is not enough to tell apart from luck. The shrinking share count list did a little better at +0.21% a month, still not a clear result.

What it means for your trading

A big buyback is not a reason to buy a stock on its own.
Watch the share count, not just the headline buyback. Companies issuing a lot of new stock lagged, even when they bought some back.
Buyback figures work best as context next to a stock’s own trend.

Limits: S&P 500 stocks only, month by month from 2018, which includes one bear market (2022). Results are averages across about 36 stocks a month; any single stock can do far better or worse.

See who is buying back stockEvery S&P 500 buyback: spent over 12 months, left in the program and the average price paid.Open →

Stock buybacks questions

Do stock buybacks increase the stock price?

Not reliably, in our test. From January 2018 to May 2025, the 10% of S&P 500 companies with the highest buyback yield did 0.12% a month better than the average member, a gap too small and too inconsistent to tell apart from luck.

What is buyback yield?

Buyback yield is the money a company spent buying back its own stock over the last 12 months divided by its market value. A 5% buyback yield means the company bought back about 5% of its value in a year.

Do companies that issue a lot of stock do worse?

In our test they did. The 10% of S&P 500 companies issuing the most stock, net of buybacks, lagged the average member by 0.31% a month from 2018 to May 2025, though the gap was smaller in the most recent 18 months.

Backtest results are hypothetical. They are based on historical prices, include a simple trading cost and leave out taxes and other costs of real trading. Past results do not guarantee future returns. For informational and educational purposes only. Not investment advice, and not a recommendation to buy or sell any security.