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Chief Market Strategist
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  S&P 500 Companies Still Cash Rich Despite Returning More Capital To Shareholders
Posted Under: Broader Stock Market
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View from the Observation Deck  

  1. S&P 500 companies have been rewarding shareholders by increasing stock dividend payouts as well as repurchasing company stock in an effort to boost earnings-per-share growth via the reduction of share count.
  2. From Q1'11 through Q1'15, S&P 500 companies increased their spending on buybacks and stock dividends from $546.02 billion to $900.14 billion. That represents a 64.9% increase in spending.
  3. Over that same period, despite increasing capital outlays on buybacks and stock dividends by $354.12 billion, the cash and equivalent holdings of the S&P 500 Industrials (Old) companies increased from $0.96 trillion to $1.23 trillion.
  4. Keep in mind that S&P 500 companies also utilize capital for such things as mergers and acquisitions, investment in plants and factories, and to purchase software and equipment. 
  5. Companies have been able to boost spending and their cash holdings while operating in the midst of a modest economic recovery, in our opinion.
  6. Data from the Bureau of Economic Analysis shows that U.S. real GDP growth has averaged just 2.1% in the current recovery (Q3'09-Q1'15), according to Bloomberg.
  7. We will continue to monitor this dynamic moving forward.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance.

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Posted on Tuesday, June 30, 2015 @ 2:40 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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