Companies in the S&P 500 index in 2014 can return to their shareholders about $ 1 trillion through the payment of dividends or the stock repurchase procedure.
Over the past quarter, the amount spent on the repurchase of shares may have reached its historical record.
This is stated in a study by Goldman Sachs. The indicator rose sharply compared to last year, when investors received only $ 800 million.
“The companies included in the S & P500 index spent $ 476 billion on the buyback procedure. In 2014, we expect companies to spend 23% more – $ 587 billion. The amount of dividends paid in 2013 amounted to $ 312 billion, in 2014 we expect growth by 20% to $ 375 billion, ”said Stuart Kaiser, strategist at Goldman Sachs, in a note.
Technology companies spend much more on stock repurchases and dividends than companies from other sectors. Goldman Sachs experts explain this by the extremely high incomes that companies in this sector have recorded in recent years.
Over the past quarter, the amount spent on the repurchase of shares may have reached its historical record, in any case, this is the estimate of Hard Silverblatt, chief analyst at S&P Dow Jones Indices. Exact data will be published this week.
However, the amount that goes to buyback is likely to not last at such a high level. Investors will choose companies that, in addition to increasing profits, increase sales. But for companies that increase profits by resorting to buybacks, investors are likely to turn their backs.
“People are starting to get smarter: McDonalds and IBM have been doing buybacks for several years, but stocks have stagnated. People want to see real income, real sales, ”said Paul Nolte, portfolio manager of Kingsview Asset Managemen.
Meanwhile, companies continue to raise $ 200 billion per quarter and have been doing this since 2012.