Roger Ibbotson examines how stock returns are ultimately tied to total payouts and economic productivity rather than valuation changes alone. The paper challenges conventional dividend-only thinking by arguing buybacks materially reshape return expectations, while showing payout growth has historically tracked GDP and productivity surprisingly closely.
The Long Run Drivers of Stock Returns: Total Payouts and the Real Economy
Roger Ibbotson
Research
31 Pages
Key Takeaways
Buybacks Changed Payout Math: Following the 1982 SEC buyback ruling, total yield reached 4.89% from 1871 to 2014, exceeding the traditional 4.50% dividend yield.
Valuation Impact Minimal: From 1871 to 2014, changes in price-to-total-payout ratios contributed just 0.20% annually to total returns versus 2.05% payout growth.
Economic Growth Connection: Historical equity returns reached 9.05% annually from 1871 to 2014, with aggregate payout growth closely matching GDP and productivity growth over time.
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