Tags: Howard Silverblatt | value | buybacks | dividends

Analyst Silverblatt Questions Long-Term Value of Buybacks, Dividends

By    |   Thursday, 27 March 2014 10:42 AM

Companies continue to dole out billions of dollars for share buybacks and dividends, but Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, questions whether this is the best use of corporate cash.

Companies in the Standard & Poor's 500 Index spent $214.4 billion on share buybacks and dividends in the fourth quarter, trailing only the $233.2 billion shelled out in the third quarter of 2007, according to S&P Dow Jones Indices, CNBC.com reports.

The emphasis on buybacks and dividends comes in "reaction to activists and potential activists," Silverblatt told the news service. "If you have people knocking on the boardroom door, you have to answer it or reinforce the door."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

He expects heavy buybacks and dividends again this quarter.

The buybacks can make companies' earnings per share look good, and the dividends can make shareholders feel good. But are they in the best interests of the companies?

"It's instant gratification, longer term is a different question," Silverblatt said. "Capital expenditures are setting a record for 2013, but where they are spending is not on new plants or a second shift, things that would add jobs."

Meanwhile, BlackRock CEO Laurence Fink expressed concern about the trend in a letter to all the companies in the Standard & Poor's 500 Index that was obtained by The Wall Street Journal.

"Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks," he wrote.

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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Companies continue to dole out billions of dollars for share buybacks and dividends, but Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, questions whether this is the best use of corporate cash.
Howard Silverblatt,value,buybacks,dividends
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2014-42-27
Thursday, 27 March 2014 10:42 AM
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