Current 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.
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
(Jun 22, 2000)
|CIBC Canadian Buyback Index||11.66%||11.07%||10.74%||9.74%||10.62%|
|S&P/TSX Composite TR Index||5.87%||9.70%||7.80%||6.30%||5.22%|
|CIBC U.S. Buyback Index||26.21%||18.73%||16.00%||16.67%||13.57%|
|S&P 500 TR Index (CAD Hedged)||17.91%||17.31%||13.95%||11.97%||5.94%|
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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