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Corporate Finance Briefing: S&P 500 Buybacks & Dividends

Yardeni Research, Inc.

October 1, 2021

Dr. Edward Yardeni 516-972-7683 [email protected]

Joe Abbott 732-497-5306 [email protected]

Mali Quintana 480-664-1333 [email protected]

Please visit our sites at www.yardeni.com blog.yardeni.com

thinking outside the box Table Of Contents TableTable OfOf ContentsContents

Buybacks & Dividends 3-6 Buybacks 7 S&P 1500/500/400/600 Divisors 8 Buybacks & Dividends 9 Buybacks & Dividends as % of Operating Earnings 10 S&P 500 Sectors Buybacks 11 S&P 500 Sectors Cumulative Buybacks Since Q1-2009 12 S&P 500 Sectors Dividends 13 S&P 500 Sectors Buybacks 14

October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends Figure 1. 1050 1050 S&P 500 BUYBACKS (billion dollars, annualized) 950 950

850 850 Actual x 4 (795.4) Q2 750 4-Quarter Sum (609.3) 750

650 650

550 550

450 yardeni.com 450

350 350

250 250

150 150

50 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Figure 2. 550 550 S&P 500 DIVIDENDS (billion dollars, annualized) Q3 500 500

450 450

400 Actual x 4 (521.2) 400 4-Quarter Sum (501.2) 350 350

300 300

250 yardeni.com 250

200 200

150 150

100 100

50 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Page 3 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends Figure 3. 250 250 S&P 500 BUYBACKS (billion dollars, quarterly, nsa)

200 Q2 200

150 150

100 yardeni.com 100

50 50

0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Figure 4. 140 140

S&P 500 DIVIDENDS Q3 (billion dollars, quarterly) 120 120

100 100

80 80

60 yardeni.com 60

40 40

20 20

0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Page 4 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends Figure 5. 5 5 S&P 500 DIVIDENDS & BUYBACKS (trillion dollars, annualized) Sep

4 4

Buybacks Dividends

3 yardeni.com 3 S&P 500 Index

2 2

Q2 1 1

Q3

0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Figure 6. 1000 1000 S&P 500 BUYBACKS (billion dollars, annualized) 800 Q2 800

600 600

400 400

200 200

0 0 12 12 S&P 500 FORWARD EARNINGS YIELD & CORPORATE BOND YIELD 10 (percent) 10

8 8

6 6 9/24 4 4 BoFA Merrill Lynch AAA Sep 2 Corporate Bond Yield (2.5) 2 S&P 500 Forward Earnings Yield* (4.8) yardeni.com 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

* Forward earnings (time-weighted average of consensus operating earnings estimates for current and next year) divided by S&P 500 stock price index. Source: Thomson Reuters I/B/E/S, Standard & Poor’s and Bank of America Merrill Lynch.

Page 5 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends Figure 7. 1600 1600 S&P 500 BUYBACKS & DIVIDENDS (billion dollars, annualized) 1400 1400 Q2 1200 1200

1000 1000 Total* (1095.9) 800 800

600 600

400 400

200 200

0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

1000 1000

800 Q2 800

600 Buybacks* (609.3) 600

400 400

200 200

0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

550 550 Q3 500 500

450 450

400 400 Dividends* (501.2) 350 350

300 300 yardeni.com 250 250

200 200

150 150

100 100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

*4-quarter sum. Source: Standard & Poor’s.

Page 6 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks Figure 8. 600 600 TOTAL GROSS ISSUANCE OF STOCKS MINUS S&P 500 BUYBACKS (billion dollars) 400 Total Gross Issuance 400 of Stocks Minus S&P 500 Buybacks 200 (annualized) 200

0 0

Q2 -200 -200

-400 -400 Q2

-600 -600 Corporate Equities: Net Issuance Nonfinancial Corporate Business -800 (4-quarter sum) -800

yardeni.com -1000 -1000 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Federal Reserve Board and Standard & Poor’s Corporation.

Page 7 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com S&P 1500/500/400/600 Divisors Figure 9. 50000 8 S&P 1500 DIVISOR* S&P 1500 DIVISOR* 48000 (y/y percent change) 6 4 46000 10/1 2 44000 0 42000 -2 10/1 40000 -4

38000 -6 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

9750 10 S&P 500 DIVISOR* S&P 500 DIVISOR* (y/y percent change) 8 9250 6

8750 4 10/1 10/1 8250 2 0 7750 -2

7250 -4 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

3000 10 S&P 400 MIDCAP DIVISOR* S&P 400 MIDCAP DIVISOR* (y/y percent change) 5 2500 0 10/1 2000 -5

1500 -10 -15 1000 10/1 -20

500 -25 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

2500 10 S&P 600 SMALLCAP DIVISOR* S&P 600 SMALLCAP DIVISOR* (y/y percent change) 5 2000 10/1 0

1500 -5

-10 1000 10/1 -15 yardeni.com 500 -20 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

* Divisor is used to ensure that changes in shares outstanding, capital actions, and the addition or deletion of stocks to the index do not change the level of the index. Source: Standard & Poor’s Corporation.

Page 8 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends Figure 10. 1400 1400 S&P 500 YIELD FROM BUYBACKS & DIVIDENDS 1200 1200 Q2 1000 Buybacks + Dividends 1000 (billion dollars, trailing four-quarter) 800 (1095.90) 800 600 600

400 400

200 200

0 0 8 8 Yield (%) 7 7 Buybacks (1.68) 6 Dividends (1.37) 6 5 Buybacks + Dividends (3.02) 5 4 4 3 Q2 3 2 2 Q2 Q3 1 1 yardeni.com 0 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s Corporation.

Figure 11. 250 250 S&P 500 BUYBACKS (billion dollars, quarterly) 200 Q2 200

150 150

100 100

50 50

0 0 1.4 1.4

1.2 1.2

1.0 Buybacks as a % of 1.0 S&P 500 Market Cap (0.55) .8 .8

.6 .6 Q2 .4 .4

.2 .2 yardeni.com .0 .0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s Corporation.

Page 9 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Buybacks & Dividends as % of Operating Earnings Figure 12. 1600 1600 S&P 500 BUYBACKS, DIVIDENDS, & OPERATING EARNINGS Q2 1400 (billion dollars, trailing four-quarter) 1400 1200 Buybacks (609.3) Operating Earnings (1476.9) 1200 Dividends (501.2) Buybacks+Dividends (1095.9) Q2 1000 1000 800 800 600 Q2 600 Q3 400 400 200 200 0 0 150 150 Buybacks+Dividends as percent of 125 Operating Earnings (74.2) 125

100 100

75 Q2 75

yardeni.com 50 50 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s.

Figure 13. 1750 1750 S&P 500 EX-ENERGY BUYBACKS, DIVIDENDS, & OPERATING EARNINGS 1500 (billion dollars, trailing four-quarter) Q2 1500 Buybacks (606.8) Operating Earnings (1479.4) 1250 1250 Dividends (445.3) Buybacks+Dividends (1052.0) 1000 Q2 1000

750 750 Q2 500 Q2 500 250 250

0 0 175 175 Capped at 150% due to extreme values. 150 150 Buybacks+Dividends as percent of 125 Operating Earnings (71.1) 125

100 100

75 Q2 75 yardeni.com 50 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Standard & Poor’s Corporation.

Page 10 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com S&P 500 Sectors Buybacks Figure 14. 300 40 S&P 500 SECTORS BUYBACKS HEALTH CARE 250 35 (quarterly, billion dollars) 30 200 Total (198.8) Q2 (17.8) 25 150 20 Q2 100 15 10 50 5 0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 30 30 COMMUNICATION SERVICES Q2 INDUSTRIALS 25 25

20 (27.3) (14.9) 20 15 Q2 15 10 10 5 5 0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 50 100 CONSUMER DISCRETIONARY INFORMATION TECHNOLOGY 40 80

30 (19.2) (62.8) Q2 60

20 Q2 40 10 20

0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 CONSUMER STAPLES MATERIALS 20 10 (8.9) (4.6) 8 15 6 10 Q2 Q2 4 5 2 0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 30 2.0 ENERGY REAL ESTATE 25 1.5 20 (1.6) (0.0) 15 1.0 10 .5 5 Q2 0 Q2 .0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 60 10 FINANCIALS UTILITIES 50

yardeni.com 8 40 Q2 (41.8) (0.0) 6 30 4 20 10 2 0 Q2 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Note: Real Estate sector data start Q3-2016. Source: Standard & Poor’s.

Page 11 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com S&P 500 Sectors Cumulative Buybacks Since Q1-2009 Figure 15. 9000 1000 S&P 500 SECTORS CUMULATIVE HEALTH CARE 7500 BUYBACKS SINCE Q1-2009 Q2 Q2 800 6000 (quarterly, billion dollars) (832.7) 600 4500 Total (7363.0) 400 3000 1500 200 0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 250 750 COMMUNICATION SERVICES Q2 INDUSTRIALS Q2 200 600 (227.5) 150 450 (641.6) 100 300

50 150

0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 1000 2000 CONSUMER DISCRETIONARY INFORMATION TECHNOLOGY Q2 800 Q2 1600

600 (834.4) (1775.8) 1200

400 800

200 400

0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 600 180 CONSUMER STAPLES MATERIALS Q2 150 450 Q2 (507.9) (135.4) 120 300 90 60 150 30 0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 350 15 ENERGY REAL ESTATE Q2 300 Q2 12 250 (305.4) (13.7) 200 9 150 6 100 3 50 0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 1250 30 FINANCIALS UTILITIES Q2 25

1000 Q2 yardeni.com (1075.6) (24.0) 20 750 15 500 10 250 5 0 0 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Note: Real Estate sector data start Q3-2016. Source: Standard & Poor’s.

Page 12 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com S&P 500 Sectors Dividends Figure 16. 160 20 140 S&P 500 SECTORS DIVIDENDS HEALTH CARE Q2 18 (quarterly, billion dollars) 16 120 Q2 14 100 (123.2) (17.9) 12 80 10 60 8 40 6 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 35 14 30 COMMUNICATION SERVICES INDUSTRIALS 12 25 (8.6) (10.7) Q2 20 10 15 8 10 Q2 6 5 0 4 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 14 25 CONSUMER DISCRETIONARY INFORMATION TECHNOLOGY Q2 12 20 10 (6.7) (21.5) 15 8 Q2 10 6 4 5 2 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 15 5 CONSUMER STAPLES Q2 MATERIALS Q2 4 12 (13.7) (4.3) 3 2 9 1

6 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 14 7 Q2 ENERGY REAL ESTATE 6 12 5 Q2 10 (10.6) (6.4) 4 8 3 2 6 1 4 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 30 9 25 FINANCIALS UTILITIES 8 yardeni.com 20 7 (16.3) (6.7) Q2 15 Q2 6 10 5 5 4 0 3 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Source: Standard & Poor’s.

Page 13 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com S&P 500 Sectors Buybacks Figure 17. 1000 125 S&P 500 SECTORS BUYBACKS HEALTH CARE 800 (trailing four quarter sum, billion dollars) 100

600 Total (609.3) Q2 (60.7) 75 Q2 400 50

200 25

0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 100 100 COMMUNICATION SERVICES INDUSTRIALS 80 Q2 80

60 (82.9) (39.1) 60

40 Q2 40

20 20

0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 120 300 CONSUMER DISCRETIONARY INFORMATION TECHNOLOGY 100 (47.2) Q2 225 80 (221.9) 60 150 Q2 40 75 20 0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 75 30 CONSUMER STAPLES MATERIALS 60 (31.6) 25 (12.1) 20 45 15 30 Q2 Q2 10 15 5 0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 100 5 ENERGY REAL ESTATE 80 4

60 (2.5) (1.6) 3

40 2 Q2 20 1

0 Q2 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 200 15 FINANCIALS UTILITIES

yardeni.com 12 150 (102.9) (3.9) 9 100 Q2 6 50 Q2 3

0 0 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Note: Real Estate sector data start Q2-2017. Source: Standard & Poor’s.

Page 14 / October 1, 2021 / S&P 500 Buybacks & Dividends Yardeni Research, Inc. www.yardeni.com Copyright (c) Yardeni Research, Inc. 2021. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports and podcasts posted on www.yardeni.com, blog.yardeni.comhttp://blog.yardeni.com, and YRI’s Apps are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company’s stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments.

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