Examining Share Repurchasing and the S&P Buyback Indices in the U.S. Market

S&P Global

Liyu Zeng, Priscilla Luk

Research

27 Pages

S&P Dow Jones Indices examines how share repurchases evolved into the dominant corporate payout method and how related indices behave. The study reviews motives for buybacks, their interaction with dividends, and the historical performance of buyback indices across large, mid, and small cap segments. It focuses on sector tilts, equal weighted construction, and how these portfolios performed in different market environments.

Key Takeaways

Buybacks dominate payouts: Since 1997 buybacks have exceeded dividends and became the main cash distribution method for many firms.
Index construction choices: Buyback indices use equal weighting and buyback ratio screens, tilting toward higher earnings yield and smaller companies.
Distinct performance profile: Relative to dividend strategies, buyback indices historically showed balanced results in rising and falling markets.
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