However, there is debate surrounding the merits of buybacks over dividends. 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.
However, PKW also offers the potential for dividend growth.
“The Buyback Achievers ETF only yields 1.3%, but its quarterly distribution is on the upswing: in the past 12 months, it’s paid out a total of $0.59 a unit, up from $0.53 in the preceding period,” adds Forbes.
PowerShares Buyback Achievers Portfolio
