Buybacks Make Sense
Focusing solely on high dividend paying companies 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
(Jun 22, 2000)
|CIBC Canadian Buyback Index||1.98%||9.60%||7.98%||10.61%||10.27%|
|S&P/TSX Composite TR Index||3.03%||7.62%||4.98%||7.56%||5.13%|
|CIBC U.S. Buyback Index||4.42%||14.21%||11.48%||18.35%||12.70%|
|S&P 500 TR Index (USD)||3.78%||11.72%||9.66%||13.95%||5.48%|
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.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase First Asset ETFs and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Please read the prospectus before investing. Important information about an exchange traded fund (ETF) is contained in its respective prospectus. ETFs are not guaranteed; their values change frequently and past performance may not be repeated. Commissions, management fees and expenses all may be associated with an investment in ETFs.
The opinions contained in this communication are solely those of the First Asset at the indicated date of the information and are subject to change without notice. This communication may contain forward looking statements which are based on expectations, estimates and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Other events which were not taken into account may occur and may significantly affect the returns or performance of the Fund. First Asset does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by law. First Asset assume no responsibility for any losses or damages, whether direct or indirect, which arise from the use of this information and expressly disclaims liability for any errors or omissions in this information.
Certain trademarks of Canadian Imperial Bank of Commerce and/or certain of its affiliates (collectively "CIBC") have been licensed by First Asset Investment Management Inc. ("First Asset") for use in connection with the First Asset ETFs. The securities of the First Asset ETFs are not sponsored, promoted, sold or supported in any other manner by CIBC or by the index calculation agent, Solactive A.G. ("Solactive"), nor do CIBC or Solactive offer any express or implicit guarantee or assurance either with regard to the results of using the indexes on which the First Asset ETFs are based, or the index prices at any time or in any other respect.
Index Provider: CIBC Capital Markets
CIBC Capital Markets is a leading provider of quantitative index strategies across multiple asset classes including equities, commodities, FX and rates to retail investors, asset managers, pension plans and insurance companies in North America. Our index family provides factor, trend, curve, hedging and thematic based investing while facilitating exposure to various asset classes in a systematic, transparent and cost-efficient manner. CIBC was the first commodity index provider in Canada and has been named the Canada Derivatives House of the Year by GlobalCapital for four consecutive years (The GlobalCapital Americas Derivatives Awards (2014 - 2017)).
Canadian and U.S. Buyback ETF Opportunities
from First Asset