These 10 S&P 500 Stocks Have Solid Dividends, Not Just Big Buybacks

Last week’s Income Investing column focused on shareholder yield, which combines dividends with stock buybacks, by sector. This week, Barron’s decided to drill down and look at the shareholder yields of 10 particular companies in the

S&P 500.

True, equity income investors probably are more concerned about the dividend, because it’s money in their pockets today, while the benefits of a stock buyback would accrue further out. Still, a shareholder yield is important to consider for those investors seeking dividend income.

“The presence of a buyback on top of an above-market dividend yield is a strong indication that management is going to probably continue to be a good capital allocator,” says Chris Senyek, chief investment strategist at Wolfe Research.

It’s also often a sign that a company will continue to support its dividend and boost it regularly, he adds. “To me, the combination of a dividend and buyback yield is a proxy for capital-return-friendly management teams and companies.”

But different investors can take away different things from a shareholder yield.

Apple (ticker: AAPL), for instance, has a paltry dividend yield of 0.5%, though its payout has been growing regularly. Its shareholder yield, however, was 4.5% recently, thanks to a lot of buybacks. In its fiscal year ended last September, Apple repurchased about $86 billion of its common shares on top of $14.5 billion in dividends.

“The Street is laser-focused on buybacks for Apple rather than dividends, given its growth prospects,” says Dan Ives, a technology analyst at Wedbush Securities. “The overall yield is healthy and adds to the Street looking at Apple as a Rock of Gibraltar tech stock” during a difficult stretch for that sector.

With the help of Wolfe Research, Barron’s screened for the 10 S&P 500 companies with the highest shareholder yields, but with a twist. To make the cut, a company had to have a dividend yield of at least 2%. That’s well above the S&P’s recent average of around 1.4%.


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