Moreover, Subramanian believes we may see higher dividend yields since the “dividend payout ratio is still near the low end of its historical range,” and an aging demographic means “the demand for yield will only grow.”
[related_stories]Erin Gibbs of S&P Investment Advisory also pointed out that the outperformance of dividend-paying stocks isn’t anything new.
Over the past 15 years, relative returns show that “about two-thirds of the time, you’re better off buying high-dividend stocks than high buybacks,” Gibbs said on CNBC.
At the crux of the problem, stock repurchases could cost future growth, potentially trading short-term performance for long-term gains. According to an analysis of FactSet indices since 2005, companies that spend the most on buybacks in the S&P 1500 have underperformed those that have not had a single buyback, reports Mark Fahey for CNBC. While stock buybacks helped boost gains over the short run, the effect was negative 36 months after a buyback announcement.
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