Updated: November 23, 2015
Companies that put cash in their investors’ pockets beat the market consistently over time. And there’s one specific “payout loophole” that can be particularly profitable when done properly.
Today, firms have lots of cash to share. As of the end of the second quarter, corporate America was sitting on $1.43 trillion, up 5.5% from a year earlier.
That’s despite the fact that management is doing its best to shovel greenbacks out the door and back to investors. According to Goldman Sachs Group (GS), total spending on dividends and share buybacks will leap 7% in 2016, to just over $1 trillion.
Many first-level investors complain that CEOs should be reinvesting in their companies instead, but they’re doing fine on that front, too: Goldman sees R&D spending rising 5% next year, while capex will gain 6% (excluding the beaten-down energy sector).… Read more