There is now hard data to show that the biggest tax break in three decades is being funneled to capital expenditures rather than share buybacks. This according to a recent article in Bloomberg. “Among the 130 companies in the S&P 500 that have reported results in this earnings season, capital spending increased by 39 percent,” the article reports, “the fastest rate in seven years, data compiled by UBS AG show. Meanwhile, returns to shareholders are… Read More
The tax bill will have a significant impact on corporate finances, reports a recent Wall Street Journal article, although the effects “can vary widely by company.” According to Natixis chief economist Joseph LaVorgna, analysts are expecting the legislation to “provide a 7% to 8% boost in aggregate per-share profits for companies in the S&P 500 this year,” a big portion of which will come from increased corporate spending. “Someone else’s capital outlay is another company’s… Read More
By Justin J. Carbonneau (@jjcarbonneau) — Sometimes someone says something that hits you like a ton of bricks. Well, in early January Warren Buffett was on CNBC and one of the topics he was discussing was tax reform and its impact on the value of stocks (see full video here, pick it up at the 17 min mark). In classic Buffett fashion, he makes a few very salient points that are worth digging into. Buffett… Read More
The new tax legislation, which lowered the corporate tax rate from 35 percent to 21 percent, is “significantly altering how investors value equities and the market,” according to a recent CNBC article. On CNBC’s Squawk Box earlier this month, Warren Buffett said, “The tax act is a huge factor in valuation.” Simple math, said Buffett, says that the tax bill will result in a stock owner’s share of corporate profits increasing from 65 percent to… Read More
The new tax legislation will limit a company’s ability to write off interest paid on debt, and that could hurt more leveraged firms–this according to a recent article in The Wall Street Journal. The article states, “Full deductibility of interest has long made borrowing more attractive for companies when they needed money, instead of raising capital through selling equity,” and adds that the new tax law will limit deductible interest payments to 30 percent of… Read More