A (Very) Short History of Shareholder YIeld

I’m working on a longer piece on share repurchases (and shareholder yield) and found the two charts below very interesting.  Buybacks are an important part of the corporate toolkit here in the U.S.–since the late 1990’s, cash spent on gross buybacks has exceeded cash spent on dividend payments. This first chart shows the total dollar value of all gross buybacks, net buybacks (subtracting any stock that was issued), and dividends in $MM over the trailing 12-month period.  These values come directly from the statement of cash flows for all U.S. firms. 

I’ve seen people argue that the peak of buybacks in 2007 shows how foolish buyback programs are–this is nonsense.  The raw dollar is less important that the “yield” that results from dividing buybacks and dividends by total market cap of the market, seen in the second figure below. 

Buyback yield is a great factor for stock selection that I will expand on in a future piece, but what stands out here is the total yield for the market is around 4% today–much higher than the 2% of so dividend yield for the market.  The net yield took a huge bath in 2009 mainly because big banks were raising so much capital. 

Of course some investors want the actual cash dividend, but for shareholders that intend to keep holding their stocks, buybacks should be considered in the total calculation of yield.