Category Archives: S&P500 total returns

7/7/19: Investment for growth is at record lows for S&P500


Interesting chart via @DavidSchawel showing changes over time in corporate (S&P500 companies) distribution of earnings:

In simple terms:

  1. Much discussed shares buybacks are still the rage: running at 31% of all cash distributions, second highest level after 34% in 2007. On a cumulated basis, and taking into the account already reduced free float in S&P 500 over the years, this is a massive level of buybacks.
  2. 'Investment for growth' - as defined - is at 51% - the lowest on record.
  3. Meaningful investment for growth (often opportunistic M&As) is at 38%, tied for the lowest with 2007 figure.
S&P 500 firms are clearly not in investment mode. Despite 'Trump incentives' - under the TCJA 2017 tax cuts act - actual capex is running tied to the second lowest levels for 2018 and 2019, at 26% of all cash distributions.