Friday, October 07, 2016

Inspite Of Decline In Buybacks, Aggregate 'As Reported Earnings' Continue To Increase

Last week S&P Dow Jones Indices reported preliminary aggregate data on buybacks, dividends and earnings for the quarter ending June 30, 2016. Of note in the second quarter is buybacks declined 21% versus Q1 2016 and down 3.1% versus Q2 2015. Importantly, as reported earnings increased for the third consecutive quarter increasing to $201.79 billion versus $189.37 billion in Q1 2016. Dividends of $98.3 billion represented a 4.1% increase versus Q2 2015. Year over year dividend growth has remained positive since June 2010, although growth has slowed to a mid single digit growth rate.

Data source: S&P Dow Jones Indices

As Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices notes in the report,
  • Cash reserves also set a new record for the second consecutive quarter, as S&P 500 Industrial (Old), which consists of the S&P 500 less Financials, Transportations and Utilities, available cash and equivalent now stands at $1.374 trillion, up 2.0% from the prior record of $1.348 trillion. The current cash level is 86 weeks of expected 2016 operating income (the same as was posted for Q1 2016), giving corporations leeway in their expenditures.
  • “Shareholder returns continue to be strong, even as the quarter ticked down from last quarter’s record, Cash has increased to a record, as low-cost financing globally remains plentiful."
  • "The rate of dividend increases continues to slow across sector lines, as income investors remain limited in their alternatives. Base buyback expenditures, those used to negate stock options, may need to increase in Q3 2016 to compensate for higher share prices. Discretionary buybacks, used to reduce share count and increase EPS, remain the main unknown.”

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