Once upon a time, everyone was doing share repurchases. Then Covid-19 hit, and businesses of all sizes were looking to conserve cash. As a result, repurchases went out of vogue. But now they’re back, and many investors look to buybacks as an indicator of stocks to buy for long-term profits.

In the second quarter of 2021, share repurchases for S&P 500 companies reached $198.8 billion. That’s up 11.6% from Q1 2021 and within $24.2 billion of the all-time high of $223 billion seen in Q4 2018.

Although 294 S&P 500 companies bought back $5 million or more of their stock in the second quarter, 20 stocks accounted for 55.7% of the dollar value of those buybacks. 

Share repurchases are expected to continue to grow in the third and fourth quarters of 2021. With that in mind, here are 10 stocks to buy from companies that are buying back their shares in 2021:

• Masco (NYSE:MAS)
• Target (NYSE:TGT)
• Dollar Tree (NASDAQ:DLTR)
• Nucor (NYSE:NUE)
• Deckers Outdoor (NYSE:DECK)
• Bank of New York Mellon (NYSE:BK)
• Home Depot (NYSE:HD)
• Yum Brands (NYSE:YUM)
• O’Reilly Automotive (NASDAQ:ORLY)
• Microsoft (NASDAQ:MSFT)

Stocks to Buy: Masco (MAS)

Buyback Amount: $2 billion

Shares Repurchased in 2021: $750 million 

In June, the home improvement and building products company announced a $350 million accelerated share repurchase (ASR) through the Royal Bank of Canada (NYSE:RY). It is part of the company’s $2 billion share repurchase authorization announced in February 2021. 

Masco paid $58.41 for 85% of the $350 million. The final 15% will be based on the volume-weighted average price between June 9 and July 29. Masco’s current price is approximately the same amount as the price paid in June on its ASR. 

The company’s free cash flow (FCF) over the trailing 12 months (TTM) is $780 million, or 104% of its share repurchases through the first six months of its fiscal year. 

In November 2011, I recommended Sherwin-Williams’ (NYSE:SHW) stock over Masco. Over the past 10 years, Masco has had an annualized total return of 21.4%. That’s good, but not quite as good as SHW at 26.8%. 

Sherwin-Williams remains the more focused company, but I like Masco over the long haul.

Target (TGT)

Buyback Amount: $15 billion

Shares Repurchased in 2021: $2.7 billion 

In the first six months of fiscal 2021, Target repurchased 12.7 million of its shares at an average price of $213.06. That’s up from $609 million in buybacks through the first six months of 2020.

In September 2019, the discount retailer’s board authorized a $5 billion share repurchase program. It started buying its shares in Q1 2020. In August 2021, it started a new $15 billion share repurchase program with no expiration. 

To date, the company has repurchased $3.2 billion under the 2019 program. Once it completes the remaining $1.8 billion in buybacks, it will start on the $15 billion initiative. The company’s return on investment over 24 months is about 23%. 

In April, I recommended seven retail stocks to buy with healthy e-commerce businesses. Target was one of the seven. 

“One of the best CEO hires in recent retail history has got to be Brian Cornell at Target. The discount retailer was faltering badly when he joined the company in August 2014 after executive stints at PepsiCo (NASDAQ:PEP) and Sam’s Club. The first thing he did was close its Canadian stores at the cost of $5.4 billion,” I wrote. 

Cornell isn’t quite in Hubert Joly territory — he rescued Best Buy (NYSE:BBY) from near death — but he’s easily one of the top five CEOs in retail.   

Stocks to Buy: Dollar Tree (DLTR)

Buyback Amount: $2.5 billion

Shares Repurchased in 2021: $950 million

In the six months ended July 31, the dollar-store chain repurchased 9.16 million shares of DLTR stock at an average price of $103.71. It did not repurchase any shares in the first six months of 2020. It has approximately $1.45 billion left on its repurchase authorization plan. 

Dollar Tree’s share price is currently below the average price paid for its buybacks in 2021. Year-to-date (YTD) through Oct. 8, its stock is down almost 10%. 

However, in a move to boost sales and profits, the company recently announced that it will begin selling items for more than $1. DLTR stock jumped by 18% on the news. The company’s Dollar Tree Plus stores will sell products for prices as high as $5 starting by the end of its fiscal year. 

I don’t know what took it so long. Canada’s Dollarama (OTCMKTS:DLMAF) introduced price points above $1 in 2009.   

Nucor (NUE)

Buyback Amount: $3 billion

Shares Repurchased in 2021: $916.1 million

The maker of steel products bought back 12.15 million of its shares in the first six months of fiscal 2021 at an average price of $75.40 a share. In May 2021, the board initiated a new share repurchase program of $3 billion. Approximately $2.8 billion is still available and the program has no expiration date. 

In September, I selected Nucor and nine other companies whose stocks I thought were oversold and made good buys. 

One of my favorite reasons to own NUE stock is that it generates significant FCF. In the trailing 12 months ended July 3, Nucor had FCF of $1.76 billion — plenty to buy more of its stock in the second half of the year. 

Nucor was having a good year until mid-August, when lower commodity prices pushed its shares off an all-time high of $128.81. It now trades in the high-$90s. 

Aggressive investors would be wise to consider picking up some shares while the price is less than $100.   

Stocks to Buy: Deckers Outdoor (DECK)

Buyback Amount: $750 million

Shares Repurchased in 2021: $82.2 million

Deckers, best known for its Ugg boots, saw its Hoka performance footwear blow past its other brands in recent quarters. Not only are its Hoka sales higher than those of Uggs, but the shoes are also more profitable. 

In Q1 2022, Hoka had an operating profit of $46.4 million from $151.1 million in sales. That’s an operating margin of 30.5%, compared to 26.5% for Ugg.

If you’re a longtime owner of DECK stock, I wouldn’t get too worried. Ugg is still the number one revenue generator for the company. However, the first quarter isn’t a traditionally strong quarter for Ugg sales. So wait for the colder months to kick in.

In the meantime, the company repurchased 249,331 shares of its stock in the first quarter at an average price of $329.55. Its return on investment (ROI) on those buybacks is more than 11%. It has $728.5 million left under its existing share repurchase program. 

Decker’s TTM FCF is $500 million. Its current FCF yield is 5%.  

Bank of New York Mellon (BK)

Buyback Amount: $6 billion

Shares Repurchased in 2021: $1.3 billion

In the first half of 2021 through the end of June, Bank of New York Mellon repurchased 29.6 million of its shares at an average price of $44.49. In the third quarter of 2021, it started its new $6 billion share repurchase program. It’s good through Q4 2022. 

Bank of New York Mellon’s ROI on its 29.6 million shares is 27% through Oct. 8.

I honestly can’t remember the last time I mentioned BK stock in an article of mine. However, analysts seem to like the stock. The 19 covering it give BK stock an “overweight” rating and a median target price of $57.    

Founded by Alexander Hamilton in 1784, Bank of New York Mellon is the world’s largest custodian bank. It has $41.1 trillion under its custody or administration. It might not be glamorous work, but it delivers steady profits. 

Analysts expect it to earn $4.10 per share in 2021 and $4.49 in 2022. Thus, it trades at a reasonable 12.2x forward earnings.    

Stocks to Buy: Home Depot (HD)

Buyback Amount: $20 billion

Shares Repurchased in 2021: $6.9 billion

In the first six months of its fiscal 2021, ended Aug. 1, Home Depot repurchased $6.9 billion of its stock. That’s almost nine times the amount it bought back in 2020. Buybacks were severely cut back last year to maintain liquidity during Covid-19. 

The home improvement retailer repurchased 23 million shares of its stock in the first six months of 2021 at an average price of $300.22. In May, the board approved a new $20 billion share repurchase plan. There is approximately $17.6 billion outstanding and the program has no expiration date. 

Due to the “essential services” tag given to home improvement centers during the pandemic, Home Depot generated $16.4 billion in free cash flow in 2021, 48% higher than in 2020.   

In the second quarter, Home Depot hit $40 billion in sales for the first time in its history. But, retailer or not, HD stock always belongs in a long-term, diversified portfolio. 

Yum Brands (YUM)

Buyback Amount: $2 billion

Shares Repurchased in 2021: $530 million

In the first six months of 2021, the owner of Taco Bell, KFC and Pizza Hut repurchased 4.7 million of its shares at an average price of $111.64. As a result, it’s got an ROI of more than 10% on its 2021 buybacks to date. 

The repurchases Yum made through the end of the second quarter were conducted under its November 2019 authorization. The new program for $2 billion is good from July 1, 2021 through Dec. 31, 2022. The last share repurchase plan expired with $1.2 billion outstanding. 

In September, Yum Brands made a strategic acquisition of Dragontail Systems, an Australian company specializing in kitchen order management and delivery technology. Although it only paid $69 million for the company, it strengthened Yum’s delivery capabilities.   

Year-to-date, YUM stock has a total return of 14%, which is less than that of the entire U.S. market. However, over the past 52 weeks, it saw a total return of 32%, which is a far stronger showing. 

Stocks to Buy: O’Reilly Automotive (ORLY)

Buyback Amount: $1 billion

Shares Repurchased in 2021: $2.2 billion

At first glance, the seller of aftermarket automotive parts looks as though it has a basic share repurchase program for $1 billion. However, a closer look shows it can buy so much more. 

On page 11, note 8 of its Q2 2021 10-Q describes its share repurchase program in more detail. The $1 billion amount referred to above was an increase approved in February. In May, the board approved an additional $1.5 billion. As of June 30, it had $1.9 billion outstanding. 

Since it initiated a program in January 2011, it’s repurchased $15.5 billion of its stock at an average price of $185.60. That’s a compound annual growth rate of 12.7% on the investment.   

In June, I highlighted O’Reilly as one of seven companies with must-read shareholder letters. I was especially taken by its focus on customer service. But, of course, companies that put the customer first usually do alright. 

ORLY is an excellent long-term buy. 

Microsoft (MSFT)

Buyback Amount: $60 billion

Shares Repurchased in 2021: $23 billion

When you have a market capitalization above $2 trillion, you’re going to have a large share repurchase program in place. When CEO Satya Nadella took the helm in 2014, the buyback authorization was 33% less at $40 billion. On Sep. 14, the company increased its share repurchase program to $60 billion. It has no expiration.     

In fiscal 2021, which ended June 30, it repurchased 101 million of its shares at an average price of $227.43. Its ROI on those 101 million shares is 29.8% based on current prices. The company had $8.7 billion remaining on its old $40-billion program as of June. 

By every metric, Microsoft is operating at the top of its game. Revenues in 2021 were 21% higher at $46.2 billion. Net income increased 47% to $16.5 billion and free cash flow rose 24% to $56.1 billion.

Trading at 30x cash flow, it’s not cheap, but you get what you pay for.  

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.