Buybacks and Dividends at All-Time High in 2014, Even More Seen in 2015

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If you are an investor, chances are high that you are among the millions who like to see dividends and stock buybacks. These two strategies have contributed handily to investors’ total returns through time. Now we have data showing that buybacks and dividends hit a new combined high in 2014, and there looks to be enough runway that 2015 may be yet another record for returning capital to investors.

Standard & Poor’s has issued new data showing that buybacks among the S&P 500 companies were up by a sharp 16.3% in 2014. S&P further said that the share count reductions are continuing as 20% of the index add a tailwind to the market’s earnings per share tally. One thing that was interesting to see was that the buybacks in the fourth quarter of 2014 were down by 8.7% to $132.6 billion from the third quarter’s $145.2 billion — but on a year-over-year basis, rather than sequential, it was up 2.5% from the $129.4 billion spent during the fourth quarter of 2013.

S&P showed more data signaling that S&P 500 index members increased their buyback totals by 16.3% to $553.3 billion in 2014, versus $475.6 billion in 2013. S&P indicated that the highest buyback level was up at $589.1 billion in 2007, with the recent low point being in the recession with only $137.6 billion recorded in 2009.

ALSO READ: 6 Big Dividend Hikes Expected Very Soon

S&P’s Howard Silverblatt, who is the senior index analyst at S&P Dow Jones Indices, said:

Share count reduction continues to be the market takeaway. It has significantly increased earnings per share for 20% of the index issues in each of the past four quarters. While fourth quarter expenditures were down 8.7%, the number of issues reducing their share count by at least 4% year-over-year, and therefore increasing their EPS by at least that amount, continues to be in the 20% area — a significant level.

Additionally, S&P Dow Jones Indices said that more issues reduced their share count at 308 in the fourth quarter, versus 257 in the third quarter and up from 276 in the fourth quarter of 2013.

Silverblatt also showed that regular cash dividends are adding to the total returns on top of share buybacks. For the year ended December 2014, buyback and dividend expenditures combined reached a new record high of $903.7 billion, up from the $787.4 billion spent in 2013. Silverblatt said:

While the $350.4 billion in dividends for the year set a record, the $553.3 billion in buybacks, which represents 61.2% of the total shareholder return, failed to reach the 2007 buyback bonanza heyday high of $589.1 billion.

As any investor should know by now, Wall Street and the financial markets do not just look in reverse. They look ahead, and S&P has good news on that front as well. Cash dividends for the first quarter of 2015 are on the way to post yet another record quarter, and that is after a record 2014 in cash dividend payments.

One of the driving forces for higher total S&P 500 dividends is from the recent bank declarations. S&P noted that this could be the fifth consecutive annual double-digit gain, and 2015 may also end up being a record year for buybacks as well.

ALSO READ: The Top 8 Dividend Stocks Owned by Warren Buffett and Berkshire Hathaway

As far as the buyback and dividend exchange traded funds (ETFs), there are many strategies for dividends and buybacks that investors can focus on. The buyback themes include the AdvisorShares TrimTabs Float Shrink ETF (NYSEMKT: TTFS), PowerShares Buyback Achievers ETF (NYSEMKT: PKW) and SPDR S&P 500 Buyback ETF (NYSEMKT: SPYB). In the “growing dividends” theme, there are two key ETFs we track for this strategy: the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) and ProShares S&P 500 Dividend Aristocrats (NYSEMKT: NOBL).

As far as how these ETFs have performed, the following tickers are shown with year-to-date gains for 2015 and over the trailing 52-weeks (from last Friday):

  • TTFS: up 5.07% YTD and up 18.27% YOY
  • PKW: up 4.18% YTD and up 15.72% YOY
  • VIG: up 1.31% YTD and up 11.36% YOY
  • NOBL: up 1.66% YTD and up 17.50% YOY
  • SPYB: just launched in February 2015