Record low bond yields have income investors scurrying for stocks with attractive dividend yields and a history of dividend increases. However, Citigroup’s Tobias Levkovich says investors could be better off buying stocks in companies who are buying back their own shares.
“Figure 13 provides a list of companies within CIRA’s US coverage universe that have bought back stock and reduced outstanding shares every year over the past 10 years. We then compared that basket’s performance against the S&P Dividend Aristocrats and found that buybacks won out (see Figure 14) but only if the number of shares actually go down annually.”
However, Levkovich says the findings aren’t conclusive and notes…
“Accordingly, one should nuance stock buyback opportunities to outstanding share shrinkage rather than just containment of shareholder dilution.“
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