Looking Anew at Buybacks and Other Capital Allocations

Looking Anew at Buybacks and Other Capital Allocations

Ric Marshall and Ahasan Amin

July 06, 2021

 

In the visualization below, we draw on our previous research on stock buybacks and shareholder value and extend our analysis through the end of 2020, highlighting the surge in share buybacks after the U.S. corporate-tax cuts of 2018 and the subsequent reversal at the onset of the global pandemic in 2020. We also emphasize the importance of not painting share buybacks and other capital-allocation decisions with too broad or coarse a brush, first by providing an interactive feature that filters by Global Industry Classification Standard (GICS®) sector. This filter helps to highlight the very different emphasis, for example, on research-and-development (R&D) spending among companies in information technology and health care and on capital expenditure (capex) among energy, materials and utilities firms. And we also provide a new, higher-level and more strategically focused way of looking at these allocations, combining share buybacks and dividend payments into a consolidated “Total Payouts” plot and capex and R&D spending into a consolidated “Total Investments” plot, which can also be filtered by sector.

How to interact with this plot: Click on a particular sector icon to view overall averages for just that sector; click ALL to return to the default all-sector plotting. You can also scroll left and right by year to see how many companies were included in each sample per period, plus additional historical context.

 

 

 

These plots show average annual capex, R&D, dividends and share buybacks for the 611 constituents of the MSCI USA Index as of Dec. 31, 2020, for which the relevant data was available. Source: MSCI ESG Research LLC, based on corporate-financial-statement figures provided by Refinitiv. GICS is the industry-classification standard jointly developed by Standard & Poor’s and MSCI.


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