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US companies returned a record amount of cash to shareholders
through stock buybacks and dividend payouts in the first quarter,
continuing a trend that has helped drive the stock market's
Stock buybacks and cash dividends reached $241.2 billion during the
first three months of the year, exceeding the previous record of
$233.2 billion set in the fourth quarter of 2007, according to
S&P Dow Jones Indices. The new high is more than three times
the $71.8 billion total that was returned to shareholders in the
second quarter of 2009, when the economy was in the early stages of
recovering from the financial crisis.
All-in investment-grade new issuance thus far in June is $91.13
billion (corporates plus SSQ ). It represents the second highest
June IG total in history, with 2009's TARP-, TALF-, and
FDIC-infested $119 billion in first place.
Backing out roughly $40 billion of "funny money" from June 2009
takes the number to $80 billion thereby firmly placing June 2014
atop the leaderboard. According to Ron Quigley, head of
syndicate, Mischler Financial, that's quite an achievement for a
month that has averaged $68.59 billion across the last decade.
When a company reaches the end of an investment or growth cycle, it
needs to buy back stock or increase its dividend in order to
manufacture higher profits or equity prices. The bond market is
allowing companies to do this. The credit window is still wide open
for companies -- any company -- to get whatever kind of financing
they want at tight spreads. And choosing to invest in credit right
now would be a mostly rational decision -- maybe not prudent, but
rational. Speculative-grade default rates are at 2.1%, and
high-grade debt ratios are not excessive.
Buzz & Banter
team found some incredible stats to go along with this data. If you
annualize the first quarter's dividends and buybacks, they together
equal almost $1 trillion of cash that's being pushed back into the
equity market. For comparison, that's larger than Fidelity's equity
mutual fund business, which has
$791 billion in assets
. Even the largest ETF on the planet,
SPDR S&P 500 ETF Trust
(NYSEARCA:SPY), only has a net asset value of $126 billion.