What to make of the buyback bonanza

Buybacks are in vogue, but many investors still prefer good old-fashioned dividends.

Ben Johnson, CFA 10 February, 2016 | 6:00PM
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A version of this article was published in the December 2015 issue of Morningstar ETFInvestor. Download a complimentary copy of ETFInvestor here.

Big U.S. stocks are in the midst of a buyback bonanza. According to S&P Dow Jones Indices, S&P 500 firms spent a collective US$553.5 billion on their own shares during the 12-month period ended June 2015.

There are a host of cyclical factors driving this trend. Years into an economic expansion, corporate profitability remains robust, borrowing costs are low, and firms are flush with cash. But growing buybacks also reflect a long-standing shift in how companies are giving cash back to their shareholders.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Berkshire Hathaway Inc Class B284.56 USD0.70Rating

About Author

Ben Johnson, CFA

Ben Johnson, CFA  Ben Johnson, CFA, is director of global ETF research for Morningstar and editor of Morningstar ETFInvestor, a monthly newsletter.

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