Why Are Dividends and Buybacks Hitting Record Highs? Corporate stock buybacks and dividends are booming, thanks to the tax cuts and low interest rates.Unfortunately, artificially low interest rates are associated with unnecessary debt and a rise of corporate debt-to-GDP since the Great Recession.
S&P 500 Dividend Yield Since 1871 Since 1871, the long-term average dividend yield for the US stock market is 4.34%. The current yield of the S&P500 is 1.87% Is there an anomaly in the past 20 years? Image: multpl.com
Performance vs. S&P 500 by Uses of Cash U.S. companies that spend the most cash on dividends and buybacks have outperformed the S&P 500 since 1992. Image: Goldman Sachs Global Investment Research
Stocks – Cash & Equivalent and Short Term Investment FAAMG have plenty of cash, which could be used to buyback shares or boost dividend payments. Image: BofA Research Investment Committee
Decomposition of S&P 500 Total Returns Stock prices are driven by valuation, earnings, dividends and buybacks. Image: BofA US Equity & Quant Strategy
S&P 500 Buyback Index vs. S&P 500 Index 2021 is expected to be a good year for buybacks and dividends. Image: Morgan Stanley Wealth Management
S&P 500 Earnings and U.S. Capital Spending This chart shows that U.S. core capital spending is near a 20-year high. Are fears that U.S. companies may be curtailing spending plans overblown? The absence of dividend cuts also suggests that U.S. companies are confident in their future earnings potential. Image: The Leuthold Group
Yield Comparison – S&P 500 Didivend Aristocrats and 10-Year U.S. Treasury S&P 500 dividend aristocrats are once again higher than 10-year U.S. Treasuries. Image: Legg Mason
S&P 500 Payout Ratio Stock buybacks and dividends as a percentage of free cash flow are reaching dangerous levels. Image: MarketWatch
S&P 500 Cash Return Yield by Sector and Region Currently, the S&P 500 cash return yield (buybacks + dividends) is 5.2%, the highest since 2011. That’s much more than Europe, Japan and emerging markets. Image: Fundstrat Global Advisors, LLC