Dividends, Buybacks Set New Benchmark for Largess

Monday, November 28th, 2005

This sounds like good news. Dividends, Buybacks Set New Benchmark for Largess:

This year, the companies in the Standard & Poor’s 500-stock index are on track to pay out more than $500 billion to shareholders in the form of dividends and share repurchases, or buybacks, according to S&P. That’s up more than 30% from last year’s record — and equivalent to nearly $1,700 for every person in the U.S.

But it also means that companies are effectively saying, “We don’t know how to use all this money”:

But there could be an economic downside to the cash glut. The fact that companies have been sitting on so much cash is, in some respects, a vote of no-confidence in U.S. economic prospects: At least some companies may be signaling they can’t find enough profitable ways to reinvest their earnings, so they are simply returning it to shareholders.

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