OSAM explores why share repurchases became a dominant corporate payout tool and how investors can separate value creating buybacks from financial engineering. The paper argues that combining net buybacks, valuation, and earnings quality produced materially stronger historical returns than dividend focused strategies alone.
The Power of Share Repurchases
O’Shaughnessy Asset Management
Patrick O’Shaughnessy
Research
8 Pages
Key Takeaways
Net Buyback Advantage: Top decile net buyback stocks outperformed the worst decile by 11.29% annually from 1987 to 2014 with lower volatility across portfolios.
Valuation Matters Most: Large repurchasers trading at cheap valuations delivered a 10.2% annualized return gap versus expensive buyback firms challenging the idea that all repurchases create shareholder value.
Shareholder Yield Edge: High quality shareholder yield strategies grew $1 to $224 versus $51 for top dividend yield portfolios highlighting the benefit of combining buybacks with balance sheet discipline.
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