Saturday, July 07, 2007

Proof Buybacks Have Gained More Attention

One topic that has gained a great deal of attention lately is the increased stock buyback activity. It seems stock buybacks have garnered more attention in the board room than dividend initiations or dividend increases.

In December 2006, the Powershares organization developed an exchange traded fund that replicates Mergent's Buyback Index. The Powershares Buyback Achievers Portfolio trades under the ticker PKW. The PKW Index inception date is 12/20/2006 and has slightly underperformed the S&P 500 Index. On a hypothetical longer term performance basis, the PKW ETF would have outperformed the S&P 500 Index by a fairly wide margin.

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A chart of the hypothetical returns over a longer time period is detailed below.

(click on chart for larger image)

Powershares buyback index hypothetical performanceSource: Powershares

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