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Equity investors love two things on top of capital gains when it comes to investing over the long haul: stock buybacks and dividends. While dividends add to shareholder returns in a definite and quantitative manner now and over time, stock buybacks can be a mixed bag when it comes to returning capital to shareholders. After years and years of spending billions and billions of dollars on stock buyback plans, it seems that the buyback brigade has lost at least some of its strength. It appears that less money is going toward dividends and dividend hikes that have been seen for years and years now.

Maybe companies do not want to buy back stock with their shares hitting record highs. Maybe they are waiting for tax reform, Maybe it is a wait-and-see for better clarification on the repatriation of foreign cash. It is also important to keep in mind that up to half of shareholder returns through time come from dividends and the new investing capital they create for investors.

S&P Dow Jones Indices has released its preliminary results on stock buybacks in S&P 500 companies during the first quarter of 2017. This came to a grand total of $133.1 billion. If you look at the market caps of all S&P 500 Index components, it would still equate to being the 35th largest company in the whole S&P. And that is using after-tax money, in theory anyhow.

What will matter to investors is that the $133.1 billion spent on stock buybacks was a 1.6% decrease from the $135.3 billion used on share buybacks in the fourth quarter of 2016. More importantly, this is a 17.5% decrease from the whopping $161.4 billion used for stock buybacks during the first quarter of 2016.

It turns out that the record stock market prices may be the real hold-back here from corporate managers. The note from S&P pointed out that the first quarter of 2016 was a time when companies were supporting declining stock prices.

Over the trailing 12-months ending in March 2017, S&P 500 companies spent some $508.1 billion on buybacks. That was down 13.8% from the $589.4 billion for the prior 12-month period — and the 12-month period ending March of 2016 still remains the all-time record.

It also should be noted that not all buybacks are equally spread out among the 500 largest American companies. The rate of buybacks has remained rather concentrated. The top 20 issues accounted for 42.1% of all share buybacks, down from 46.7% for the fourth quarter of 2016.

Several takeaways were noted by S&P on stock buybacks. The lower dollars spent on buybacks resulted in fewer share count reductions, and it offered less support for companies reporting earnings per share.

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The total shareholder return came to a grand total of $234.0 billion in the first quarter if you include dividends and buybacks. This was down 2.1% from the $239.1 billion in the fourth quarter of 2016. And for the 12-month period ending March 2017, the total shareholder return was down 6.7% to $909.6 billion (from $975.0 billion) for the 12-month period ending March 2016.

S&P 500 dividends slightly declined to $100.9 billion, down from the $103.8 billion for the fourth quarter of 2016. Standard & Poor’s showed that 255 of the S&P 500 issues (companies) reduced their share count for the first quarter of 2017. That is down from 281 companies in the fourth quarter of 2016 and looks even worse than the 324 companies in the S&P 500 shrinking their float in the first quarter of 2016. Dividend payments as a whole were up 4.1% to $401.4 billion for the 12-month period ending March 2017.

S&P tracks companies which it sees reducing their share counts by 4% or more over the prior year. It is these buybacks which are seen as being meaningfully impacting to a company’s earnings per share. This critical reading fell to 71 of the 500 companies, down from 93 in the fourth quarter of 2016 and was far worse than the 139 companies back in the first quarter of 2016.

It was also shown that there are trend differences from sector to sector:

• Financials increased buybacks the most, up 10.2% to $29.5 billion, and they were the largest gain of all sectors with a 22.2% weighting of all buybacks.
• Health Care expenditures declined 6.5% to $27.0 billion, from $28.9 billion. This was 20.3% of all buybacks, down from 21.4% in the fourth quarter of 2016.
• Information Technology continued to be strong, but the rate of technology buyback spending fell by 4.4% to $27.5 billion from the prior period’s $28.7 billion. Tech now represents 20.6% of all S&P 500 stock buybacks.
• Energy buybacks remain rather low as oil and gas companies have to watch their spending. Still, this level of energy buybacks more than doubled to $2.1 billion in the first quarter of 2017 from just $1.0 billion in the fourth quarter of 2016. To show how much this is down from the past, energy companies in the S&P 500 spent some $13.1 billion in the first quarter of 2014 when oil prices were higher and when their business climate was better.

Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, said of this latest report on buybacks:

The expenditures on share buybacks declined as share prices increased, resulting in fewer share repurchases and an impact to EPS growth. Over the past two years, more than 20% of S&P 500 issues have given at least a 4% tailwind for EPS via reduced share counts; for Q1 2017, that rate dropped to 14.8%, with indications that Q2 2017 may offer even less support. Companies may have to increase EPS the old-fashioned way – by earning it… The ability of companies to increase buybacks remains high, as available cash set a new record. Net income has improved, with Q2 2017 estimates projecting additional gains, potentially setting a new record. On an issue level, the question now is where share counts end up and the overall amount of EPS support.

Companies’ ability to increase their expenditure, be it buybacks, dividends capital expenditures or M&A, remains very high, given their cash reserves and cash flow. Additionally, while dividend growth has slowed, Q2 2017 and full-year 2017 may post quarterly and annual records, respectively.

Base buyback expenditures must increase if companies wish to negate stock options, as higher stock prices can be costly and bring in additional out-of-the-money options… Discretionary buybacks, which are typically used to reduce share count and increase EPS, continued to decline, indicating that companies may feel they can compensate via higher earnings; if not, they have the choice to quickly increase their buybacks.