Stock Market Buybacks vs. Dividends. What Gets Slashed First?
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THREAD
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Let& #39;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& #39;s call I& #39;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">https://twitter.com/epsilonth...

3/ You& #39;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">https://twitter.com/business/...

4/ Don’t fight it or pick sides. You& #39;re here to play the market, and the market doesn& #39;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">https://twitter.com/JeffWenig...

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