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>> The Republican tax cut is supposed to be used to spur investments and jobs, but some investors are saying that some of that money may be used instead to reward shareholders. I'm David Randall, a reporter at Reuters, and I've been speaking with fund managers over the last week over what they think companies will do with their tax savings.
Many of them are saying that they see companies buying back their own shares as a way to boost their stock prices. Among the companies they're talking about is Microsoft, which has over 15% of its market value in cash held overseas. One fund manager said that, if a tax bill does pass, some of that money will be returned to the U.S. and given to shareholders.
He called it almost like a cherry on top of a sundae. It's not only the big companies. Fund managers say that they're buying shares of companies ranging from Michael Kors, to Southwest Airlines to Texas Instruments, because they think that companies will use this money to reward shareholders with either special dividends or buyback programs.
Fund managers say that buybacks are one of the best things companies can do with their cash. One reason is that they know exactly what they're buying when they're buying their own shares. And it helps give at least a short-term boost to the share price, because it eliminates the number of shares outstanding.
But buybacks aren't a cure-all. By giving money directly back to shareholders, companies aren't always preparing for the future. Whether that means investing in a new plant, or buying a competitor, or adding new people to their workforce. President Trump has said that he wants the tax cut to help spur hiring in the US.
This might not do it.