12/14/25
S&P 500: 6827
Nasdaq: 23,195
10 Year Treasury: 4.1%
David R. Snyder, CFA
Stock buybacks have been a major feature of this secular bull market, especially last decade when they contributed to over 20% of S&P 500 earnings growth. However, the accretion to earnings growth is much less today because of the extremely high valuations of equities. Over the last decade S&P 500 buybacks were about 60% of net income while dividends were 40% of income. The combined dividend and buyback yield has been on average 4.5%. In some recent years buybacks have exceeded capital expenditures. Just because buybacks are accretive does not necessarily make it the best use of capital. AAPL buying back their stock at a 35 P/E does not enhance shareholder value. Allocation of capital depends on cost of capital and projected returns on alternate uses of capital, including dividends. But buying back stock when the equity is overvalued is not enhancing shareholder value, even if it is accretive to earnings. Thus, current buybacks for the S&P 500 are less accretive and also decrease long term shareholder value. Yet investors are ignoring this dynamic. There are very few CEO’s similar to Warren Buffet who wisely only buys Berkshire stock back when it is undervalued.
Full Disclosure: I own several of the securities mentioned positively. None have been purchased within the last month. The opinions merely represent the opinion of the author as CIO of Journey 1 Advisors, LLC and intended to inform the readers about our investment philosophy and strategy. The contents of this report are based on sources believed to be reliable. It is not intended for circulation. It is not intended to offer investment advice, or to recommend the purchase or sale of any securities or investment product. Investment advice is only given after a client has signed an investment advisory agreement with Journey 1 Advisors, LLC and will be subject to the terms and conditions therein. Your decision to buy or sell a security should be based upon your personal investment objectives and should be made only after evaluating the stock’s expected performance and risk.