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Buybacks, Dividends Set New Record For Shareholder Returns

Apple and other companies have whetted Wall Street’s appetite for shareholder returns by ramping up their buybacks and dividends, according to recent data. Combined, recent buybacks and dividends have amounted to $241.7 billion, setting a new record.

Clearly activist investors’ continued pushes for more buybacks and dividends are working.

Buybacks on the rise

The previous record of $233.2 billion was set in the second quarter of 2007. At that time, buybacks led the returns, just as they did in the first quarter of this year, according to data compiled by S&P Capital IQ. The firm said in a recent report that the “addition to buybacks” seems to be on the rise.

For the first quarter, reported buybacks were $148 billion, an increase from the previous quarter’s $132.6 billion but less than the $159.3 billion in share buybacks that were reported in the first quarter of last year. The record for buybacks was set in the third quarter of 2007 at $172 billion.

S&P Capital IQ also found that dividends set a new record at $93.6 billion. In the previous quarter, companies reported $92.8 billion in dividends, which was the previous record. In last year’s first quarter, there were $82 billion in dividends reported by companies.

Apple leads buybacks

The firm found that Apple was again the leader in quarterly share buybacks at $7 billion. In the previous quarter, the company bought back $5 billion worth of shares.

Pfizer’s share repurchases skyrocketed during the quarter, climbing from $1.2 billion in the previous quarter and $1.2 billion in last year’s first quarter to $6 billion in this year’s first quarter. Microsoft also bought back a significantly higher amount of shares. The software giant spent $5.1 billion, compared to the $2.1 billion it spent in the previous quarter and $1.8 billion it spent in last year’s first quarter.

ExxonMobil slashed its repurchases from $3.3 billion in the fourth quarter to $1.8 billion in the first quarter. According to S&P Capital IQ’s data, that was the lowest the oil giant spend on repurchases since the second quarter of 2010 when it spent $1.6 billion.

Diluted share count issues

Because of all the share buybacks, the firm notes that reductions in share counts declined for the fifth consecutive quarter, with 20% of the S&P Dow Jones Index trimming their year over year diluted share count by 4% or more.

As a result, earnings per share rose by 4% or more for the issues. Further, the firm pointed out that on an issue level, share counts are still falling, but in terms of the total number of shares, the decline isn’t weighted or as noticeable as it is on an issue level.

“In the first quarter of 2015, 23.4% of the issues decreased their share count from the prior quarter by at least 1% compared with 8.4% that increased them at least 1%, as companies continue to respond to activist’s demand for more buybacks,” wrote S&P Capital IQ analysts. Charts is courtesy S&P Capital IQ.

Buybacks funded by borrowing

Because of how low interest rates have been, many of the companies that have been running buyback programs have been borrowing money to finance them. One particularly interesting point S&P Capital IQ made was that companies may soon find themselves paying higher interest rates if they continue to run their buyback programs this way.

Because interest rates may increase, shareholders will be able to see just how dedicated companies are to their share buybacks. These buybacks have helped to increase earnings per share for these companies.