Corporate America is giving back, bolstering shareholder returns through a record amount of dividends and buybacks. Investors can also target these companies through exchange traded funds that track share repurchases and dividend growth themes.
Over 2014, S&P 500 companies issued a record $900 billion in total buybacks and dividends, compared to the previous record $846 billion in 2007, and second-place $787 billion in 2013, reports John Melloy for CNBC.
“The theme for Q4 and 2014 continues to be shareholder return,” Howard Silverblatt of S&P Dow Jones Indices said in the article.
A record $92.8 billion in dividends was issued over the past quarter. Meanwhile, buybacks posted their second-best year ever, falling just shy of the $589 billion record in 2007.
Investors who are interested in the buyback theme as a way to bolster shareholder returns have a few options available. For instance, the PowerShares Buyback Achievers Portfolio (NYSEArca: PKW) includes U.S. companies that have effected a net reduction in shares outstanding by 5% or more over the trailing 12 month period. Additionally, the TrimTabs Float Shrink ETF (NYSEArca: TTFS) and the Cambria Shareholder Yield ETF (NYSEArca: SYLD) both include companies that return capital to shareholders through stock repurchases. [Buyback ETFs Notch Another Solid Year]
ETF investors can also follow companies that have consistently increased dividends over the years. For example, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG) tracks U.S. stocks that have increased dividends on a regular basis for at least 10 consecutive years. [Stock ETFs & Fixed-Income Yield Spread Paints Bullish Picture]
Additionally, the Schwab US Dividend Equity ETF (NYSEArca: SCHD) follows companies with consistent dividend payouts for at least 10 consecutive years. The SPDR S&P Dividend ETF (NYSEArca: SDY) underlying index mandates constituent firms have a minimum dividend increase streak of 20 years for inclusion. The S&P 500 Dividend Aristocrats Index, which only includes companies that have increased their dividends for at least 25 consecutive years, serves as the benchmark for the increasingly popular ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL). [Quality Dividend ETFs with Consistent Yields]
The buyback and dividend ETF plays have outperformed broader benchmarks. Over the past year, PKW increased 17.6%, TTFS advanced 18.7% and NOBL gained 19.7%. In contrast, the SPDR S&P 500 ETF (NYSEArca: SPY) rose 16.3% over the past year.
For more information on dividend stocks, visit our dividend ETFs category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of TTFS, SCHD and SPY.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.