Corporations To Reward Investors With Money Derived From GOP Tax Cuts

Muhtar A. Kent, CEO of the Coca-Cola CompanyWorld Economic Forum/Flickr

Companies including Coca-Cola, Pfizer, and Cisco Systems have indicated they will return the savings to shareholders.

While the Trump administration is busy pushing the narrative that corporate tax cuts will spur job growth and wage increases, CEOs of major companies are telling a different story.

According to Bloomberg News, many - including Cisco Systems Inc., Pfizer Inc. and Coca-Cola Co. - admit they will return that money to their shareholders.

Robert Bradway, chief executive of Amgen Inc., said in an Oct. 25 earnings call that the company has been “actively returning capital in the form of growing dividend and buyback and I’d expect us to continue that.”

Executives including Coca-Cola CEO James Quincey, Pfizer Chief Financial Officer Frank D’Amelio and Cisco CFO Kelly Kramer have recently made similar statements. “We’ll be able to get much more aggressive on the share buyback” after a tax cut, Kramer said in a Nov. 16 interview.

A July poll conducted by John Shin, a foreign-exchange strategist at Bank of America Merrill Lynch, indicated only 35 percent of the companies surveyed would use the tax savings for capital and expenditures. The rest would look first to stock buybacks and debt repayment.

Share buybacks are a way for companies to reward investors using spare cash. They tend to have the effect of raising share prices and appearing to increase a firm’s earnings per share by reducing the number of shares in circulation.

Shin said neither the tax cut or repatriation holiday for offshore funds would lead to a swell in job growth or wage increase.

“Companies are sitting on large amounts of cash. They’re not really financially constrained,” Shin, who conducted a survey of more than 300 companies asking their plans for a tax overhaul, said in an interview. “They’re still working for their shareholders, primarily."