Stock Market Buybacks vs. Dividends. What Gets Slashed First?
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THREAD
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Let's dig.
Here’s what the $24.1tn S&P 500 paid in the year to March. See those buybacks? Wave goodbye.
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On Wednesday's call I'll be hitting this head on.
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1/6

2/ Why? Because buybacks are now Public Enemy #1. Here’s a sample from an Influencer that frequently pops into the Twitter feed of Finance people. https://twitter.com/epsilontheory/status/1239603519113568264?lang=en

3/ You've probably seen some variation of the “airlines bought back shares equal to 96% of cash flow” tweets. It was so popular that I probably saw 50 tweets regurgitating it over 3-4 weeks. Buybacks right now are about as popular as Lee Harvey Oswald. https://twitter.com/business/status/1239606817317105664

4/ Don’t fight it or pick sides. You're here to play the market, and the market doesn't care about your unsolicited opinion. So adapt. Buybacks are socially unacceptable, at least for the time being. Now assess.

5/ How? Do the gymnastics on if this crisis is worse than Lehman or if it is instead more benign. Back then, S&P 500 buybacks were also about $700bn, slashed to ~$100bn at the bottom. Dividends were cut much less: 27%. https://twitter.com/JeffWeniger/status/1247998815501574145

6/ Current situation.
2019 S&P dividends were $58.69
Market expectation, 2021 = $42.55
That would be a total decline = 27.5%, exactly equal to Lehman.
I think the kitchen sink stimulus is so large that the direction of surprise on the $42.55 is to the upside.
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END THREAD