The bull market in the S&P 500 since March 2009 has been marked by corporations buying back their shares and paying out dividends. From Q1-2009 through Q1-2014, S&P 500 companies repurchased $1.9 trillion of their shares and paid out $1.3 trillion in dividends. During the first quarter of this year, buybacks totaled $637 billion at an annual rate, nearly matching the previous record high during Q3-2007.
As I have often observed in the past, corporations have an incentive to borrow in the bond market and use the proceeds to buy back shares when their earnings yield exceeds the corporate bond yield. That’s been the case since 2004 Read more »