Share buybacks in times of rising interest rates: What does this mean for investors?

Share buybacks in times of rising interest rates: What does this mean for investors?

According to a report by www.capital.de, interest rates are returning, making share buybacks more expensive and increasingly unattractive. This circumstance has an impact on the stock market, as an important price driver from recent years is missing and returns could fall.

Share buybacks have been a popular means of distributing profits to shareholders in recent years. Large banks in particular, such as Deutsche Bank and Commerzbank, planned to buy back their own shares in order to distribute profits to their shareholders. Deutsche Bank, for example, plans to invest 450 million euros, which in purely mathematical terms would lead to an increase in the dividend from 20 to 30 cents.

However, the return of interest rates means that share buybacks are becoming more expensive and therefore less attractive. Companies must now carefully consider whether share buybacks are still worthwhile. This has an impact on the stock market as an important growth driver is no longer available.

Overall, it is difficult to quantify the exact extent of this impact because the stock market is influenced by many factors. Nevertheless, it is to be expected that the return of interest rates and the associated impact on share buybacks will change the market environment for companies and investors. This development will need to be monitored carefully as it could potentially trigger further changes in the stock market.