Shareholder Distributions vs. Reinvestment: The Gap Grows
CFO Magazine, 2021
CFO Magazine, has published an article on 20-year trends in corporate payouts by Analysis Group Managing Principal Gaurav Jetley, Principal Laura Comstock, and academic affiliate David J. Denis from the Katz Graduate School of Business at the University of Pittsburgh. The article provides a perspective on the question, frequently debated in business and finance circles, over whether shareholder payouts are increasing at the expense of companies’ long-term value.
In “Shareholder Distributions vs. Reinvestment: The Gap Grows,” Mr. Jetley, Ms. Comstock, and Dr. Denis compared trends in shareholder payouts (dividends and share buybacks) with those in corporate reinvestment (R&D and capital expenditures). For this analysis, the authors compiled historical data on payouts, reinvestment, and operating income for the S&P 1500 companies from 1999 to 2019. The results of their analysis suggest that increased rates of corporate payouts in recent years have not prevented companies from pursuing valuable reinvestment opportunities, including investments in intangibles in the service- and technology-based industries.