With U.S. companies expected to return $1 trillion back to shareholders this year, investors can capture potential value plays through dividend and buybacks-related exchange traded funds.
After shareholder returns rose over $903 billion in 2014, S&P Dow Jones Indices projects buybacks to rise at a “double-digit” rate this year and dividends to average another 14% annually, Financial Times reports.
Many strategists forecast dividend returns to be above $400 billion for the year. Meanwhile, Goldman Sachs anticipates buybacks to reach $604 billion.
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. PKW rose 4.3% year-to-date. [Buyback ETFs: Companies Fueling Their Own Stock Growth]
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. Year-to-date, TTFS is 4.8% higher and SYLD is up 3.7%.
Foreign markets are also experiencing record low or negative interest rates. Consequently, observers believe other markets will follow the lead of the U.S. and engage in massive share repurchases. That could be good news for the PowerShares International BuyBack Achievers Portfolio (NYSEArca: IPKW), the international equivalent of the wildly popular PKW. IPKW is up 12.2% year-to-date. [Time to Consider the International Buyback ETF]
With companies steadily growing their dividends, investors can also capitalize on the trend through quality stocks that show a history of raising payouts. For instance, 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. The Schwab US Dividend Equity ETF (NYSEArca: SCHD) includes 100 stocks with consistent dividend payouts for at least 10 consecutive years. The SPDR S&P Dividend ETF (NYSEArca: SDY) holds firms that have a minimum dividend increase streak of 20 years for inclusion. Lastly, the ProShares S&P 500 Aristocrats ETF (NYSEArca: NOBL) includes companies that have increased their dividends for at least 25 consecutive years.
Fueling returns back to shareholders, the combination of slowing global growth, notably among the emerging markets, concerns over the recovery in developed markets and declining oil prices are shifting firms’ strategies to focus on returning value to shareholders.
“There are tremendous amounts of cash on the books and you have this very slow nominal growth in most countries, so there are fewer places to deploy that cash,” Russ Koesterich, BlackRock’s global chief investment strategist, said in the article.
Without potential investment opportunities, companies with cash hoards to the tune of $1.3 trillion in 2014 were more apt to increase returns to shareholders.
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.