SPYB

Are S&P 500 Stocks Returning Too Much Cash to Shareholders?

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S&P 500 companies are on pace to return a record amount of capital to shareholders via dividends and share repurchases, but what are the investment implications? Let’s take a look. By Kris Rosemann How can any company return too much cash to its shareholders, right? Well, let’s first start this discussion of recent capital allocation trends with some clarifying thoughts. We’re not against corporations returning excess capital to shareholders via dividends and buybacks (SPYB, PKW), provided they are value-generating moves. In many ways, we’re just as excited as the rest of the market about generating sustainable and growing income via strong dividend paying equities, as evidenced by the existence of the Dividend Growth Newsletter and the strong performance of its … Read more

Understanding Share Buybacks

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Image Source: Mike Mozart This article is for educational purposes only and may not reflect our updated opinion on any companies mentioned. Rule of Thumb: If share buybacks are completed at a price level that is under a firm’s fair value estimate, the activity can be considered value-creating. If share buybacks are completed at a price level that is above a firm’s fair value estimate, they can be considered value-destroying. By Brian Nelson, CFA Share buybacks are not always a “good thing.” The general rule of thumb may be that share buybacks reveal that management believes its stock is underpriced and that the executive team thinks there may be no better investment opportunities out there with firm money than its very own company … Read more