S&P 500 Companies Spend 95% of Profits on Buybacks, Not Wages or CapEx

American companies have rarely spent so much to buyback their own shares as they are now. In 2014, S&P 500 companies used 95% of their profits on share buyback and dividends. The amount tops $900 billion. That has largely fueled the rallies that kept coming. Kristina Hooper, a strategist at Allianz, said, 'While we think an appropriate way to deploy excessive cash is through increasing dividends, many executives prefer cash buybacks because of the improvement to earnings per share that could be created.' But it's not clear whether all of the cash was extra. Little was left for other necessary tasks. Wages haven't improved for workers in the U.S. and, according to Barclays, capital expenditure has fallen 20% over the past decade. A lot of people believe that's a sign that the bull momentum cannot go on. Mutual Fund Store's Chief Investment Officer Chris Bouffard said, 'Companies have done about all that they can in terms of maximizing the ability to do those buybacks. You can only go so far [before] you actually have to have a business with real growth.' Cash returned to S&P 500 shareholders is expected to exceed profits in the third quarter.