But buybacks and dividends are extremely vital for traders.
Consider that S&P 500 companies will spend more than $500 billion on dividends this year and more than $1 trillion on stock buybacks, according to Howard Silverblatt, principal index analyst for S&P Dow Jones Indices. That’s a $1.5 trillion mix, more than ever before.
No wonder these monumental cash flows are attracting attention.
As traders, customers or simply residents of the planet, it is important to consider the importance of redemptions and dividends – whether or not it is some type of self-serving corporate debauchery, use smart capital or perhaps something in between, as Aswath Damodaran, professor of finance at New York College, suggests.
“It’s actually a matter of value and merit,” he said in an interview. “Returning the money to the merchants is an efficient factor, if the company does not have a greater use for it. It’s a bad thing if it’s done in a way that destroys shareholder value. It’s all in the numbers.
Exceptional gains compared to regular income
Windfall earnings from power companies supported total buybacks and dividends.
ConocoPhillips announced earlier this month that due to a specific dividend it was making “a $5 billion increase in deliberate capital return from 2022 to $15 billion.” EOG Assets made the same transfer – declaring a special dividend of $1.50 per share, double its common quarterly dividend. And Exxon Mobil said that even if it maintained its dividend, it could spend $30 billion on buyouts, tripling the previous total.
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