Buybacks Make Sense
Focusing solely on high dividend paying companines overlooks a large opportunity set
More room to run:
Market enthusiasm in Buybacks is drawing the attention of analysts and assets from investors. Looking back over the past 17 years, buyback strategies performed well versus the broader market and offered good downside protection through market corrections.
Buyback Strategies vs. Broader Market1
Share repurchases represent an effective method of returning excess capital to shareholders. Focusing solely on high dividend paying companies overlooks a large opportunity set.
Buybacks are the most tax-efficient form of corporate payout, as they result in capital gains as opposed to more heavily taxed dividend income.
Recent tax reform in the U.S. is providing higher savings for U.S. corporations that can be used in share buyback programs. Year-to-date, there has been a record volume of U.S. buyback announcements.
Favorable valuations: In the U.S., high buyback yielding companies are currently trading at attractive P/E discounts versus the S&P 500.
Interesting way to participate in further market upside with potential downside cushion.
|1 Year||3 Year||5 Year||10 Year||Common Start
(Nov 30, -0001)
|CIBC Canadian Buyback Index||10.39%||10.86%||8.42%||12.44%||10.46%|
|S&P/TSX Composite TR Index||8.11%||9.26%||5.44%||9.49%||5.18%|
|CIBC U.S. Buyback Index||7.19%||14.68%||12.40%||20.68%||12.92%|
|S&P 500 TR Index (USD)||9.50%||13.51%||10.91%||15.92%||5.68%|
1. The rate of return chart shown is used only to illustrate the effects of the compound growth rate of the Index and is not intended to reflect future values of the Index or the Fund or returns on investment in the Fund. Returns of an Index do not represent a Fund's returns. An investor cannot invest directly in an Index. All performance data for all indices assumes the reinvestment of all distributions. CIBC index performance data results prior to September 8, 2016 are hypothetical, but are calculated using the same methodology that has been in use by the index provider since the Index was first published. Information regarding the CIBC index, including the applicable index methodology, is available at https://www.solactive.com/?s=CIBC. As a result of the risks and limitations inherent in hypothetical performance data, hypothetical results may differ from actual Index performance.
Use of benchmarks: The S&P/TSX Composite Index is a capitalization-weighted index designed to measure market activity of stocks listed on the Toronto Stock Exchange. This index is used as a benchmark to help you understand the CIBC Canadian Buyback Index's performance relative to the general performance of broader Canadian equity market. The S&P 500 Index tracks 500 large-cap U.S. stocks representing all major industries. This index is used as a benchmark to help you understand the CIBC U.S. Buyback Index's performance relative to the general performance of the broader U.S. equity market.
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Canadian and U.S. Buyback ETF Opportunities
from First Asset