This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Buybacks and Dividends: A Powerful Combination

NEW YORK ( TheStreet) -- Last August, I devoted a column to the potential benefits of owning companies that are simultaneously paying dividends and buying back stock. My theory was that despite the fact that arguments can be made against the virtues of either of these actions taken by companies, (see the original column) the combination of dividends and buybacks might actually be very powerful, with the potential to provide investors with solid returns. While it's only been about a year since the original column ran, and that is too short of a timeframe from which to draw a final conclusion about the efficacy of the dividend/buyback combination, it's time to review the early progress.

In developing the list of qualifying companies, I utilized the following criteria:
  • Minimum Market Cap: $2.5 billion
  • Increasing dividends for each of the past seven years
  • Minimum dividend yield of 2%
  • Decrease in shares outstanding of at least 5% in the past year.

Despite the rather stringent criteria, 19 names made the cut, which was more than I'd originally expected. Overall, the companies were fairly large in size, with an average market cap of about $47 billion. The average dividend yield at the time was just over 3%.

The early results are very encouraging. While the S&P 500 is up about 20.4% since my original column, the group of 19 has returned an average of 31.4%, beating the index by 11%. Just three of the 19 names; Intel (INTC - Get Report) down 9%, Darden Restaurants (DRI - Get Report) down 3.3% and Exxon Mobil (XOM - Get Report) down 1.2%, are in negative return territory.

The big winners of the group include Lowe's (LOW - Get Report) up 76%, Ameriprise Financial (AMP - Get Report) above 70%, Safeway (SWY) up 62% and Assurant (AIZ - Get Report) up 61%. LOW Chart LOW data by YCharts

Other names that made the cut include Walgreen (WAG) up 44%, Northrop Grumman (NOC) 41%, Raytheon (RTN) up 40%, Lockheed Martin (LMT) up 39%, L-3 Communications (LLL) up 38%, Becton Dickinson (BDX) up 35%, Travelers (TRV) up 30%, Conoco Phillips (COP) up 23%, Chubb (CB) up 19%, McGraw-Hill (MHP) up 15%, CSX (CSX) up 13%, and Norfolk Southern (NSC) up 3%.

Obviously, outperformance by this group over the past year has been achieved in very positive market conditions, and it would be interesting to see how companies with similar attributes would perform in down markets. The hope would be that such a group would deliver better than benchmark results in both up and down markets, but only time will tell. Sooner, or later, we'll be able to put it to the test.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SWY $35.10 -0.11%
AMP $111.10 0.00%
AIZ $80.56 0.00%
DRI $66.68 0.00%
INTC $32.14 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs