“We consider this to be a healthy level of reinvestment, capable of sustaining earnings growth in future years,” Rossi said.
Despite the growth in dividends and share buybacks, companies are still investing with the future in mind, carefully balancing capital expenditure with dividend and buybacks as return on equity rises and profit margins widen to historically high levels.
“We do not see a trade-off between investment and dividends as others do,” Rossi added. “On the contrary, we are living in an era during which the division of income favors capital over labor, allowing companies to both invest and reward shareholders.”
For instance, CAPX, which focuses on companies that invest, also includes many component holdings that have maintained some level of dividend and share buyback programs, such as Gilead Sciences (NasdaqGS: GILD) at 1.2% of the ETF’s overall portfolio, Morgan Stanley (NYSE: MS) at 1.2%, Goldman Sachs (NYSE: GS) at 1.2% and Clorox (NYSE: CLX) at 1.0%.
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Max Chen contributed to this article.