Warren Buffett called people opposed to buybacks “financial illiterates.” There may be opposition to buybacks, but as long as cash flows remain strong Wall Street is continuing its love affair with dividends and buybacks. 2022 was a record year for both dividends and buybacks for S&P 500 companies: Buybacks: $930 billion (up 5.5% year over year) Dividends: $564 billion (up 6.4% year over) Source: S&P Global It looks like this is continuing into 2023. Occidental Petroleum announced on Monday it was increasing its dividend 38% (to $0.18 from $0.13). Occidental does not pay a big dividend (it’s now only 1.2%), but it is part of a larger trend of increasing dividends and buybacks that began anew in 2022. At the same time, Chevron said that it was raising its annual buyback rate to $17.5 billion in the second quarter; it had previously been $15 billion. That’s following up on its announcement in late January, when it said it would buy back $75 billion over the next several years. If fully executed, that would amount to about 20% of the shares outstanding. We don’t have data for 2023 yet, but Howard Silverblatt from S&P Global tells me, “I’m looking for $1 trillion in S&P buybacks and a mid-single digit increase in dividends.” One trillion in buybacks would amount to a roughly 7% increase and would be the first time buybacks hit the $1 trillion mark. That, along with a mid-single-digit increase in dividends, will keep the trend of returning large amounts of cash to shareholders intact.
