Expect bigger dividends if Joe Biden's tax on stock buybacks increases, says PepsiCo's CFO

President Biden is set to end the COVID-19 national and public health emergencies in May.AP Photo/Jacquelyn Martin, Pool

  • Dividends could be larger if a plan to boost taxes on stock buybacks becomes law, PepsiCo’s CFO told CNBC.

  • President Biden called for quadrupling the tax on buybacks during his State of the Union remarks Tuesday.

  • That comes as oil companies and tech giants have approved massive repurchase plans.

Expect more cash to go toward dividends if proposals to boost taxes on stock buybacks become law, according to PepsiCo’s chief financial officer Hugh Johnston.

He told CNBC on Thursday that while he didn’t “understand why taxing buybacks is a good idea,” such policies are made in Washington, DC.

“I expect over time, probably you’ll see more money go into dividends and less money go into share buybacks, particularly if some of the proposals to take the buyback excise tax will happen,” Johnston said.

During his State of the Union address on Tuesday, President Joe Biden specifically singled out big buybacks on Wall Street, and called for the current 1% tax to be quadrupled in concert with more comments to further tax billionaires.

Biden also tied the criticism of buybacks specifically to big oil companies, which have earned massive profits amid the tight energy market.

Last month, Chevron launched a $75 billion stock buyback program and increased its quarterly dividend 6% to $1.51 per share, drawing some ire from the White House amid its requests for domestic oil companies to increase output to offset supply pressures.

“For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” White House spokesperson Abdullah Hasan said at the time.

In December, Exxon Mobil announced plans to pay $50 billion in buybacks through 2024, after spending $15 billion on them in 2022.

Other big firms raising eyebrows over buybacks last year include tech giants like Alphabet, Apple, Microsoft and Meta, which were among firms initiating the largest buybacks in 2022.

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