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Net payout return: An alternative to the traditional returns approach based on dividends and share repurchases

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  • Brawn, Derek
  • Sevǐc, Aleksandar

Abstract

We examine two alternative measures of equity returns incorporating stock repurchases as well as dividends, the other incorporating new equity issuance. We compute stock returns for 30 S&P 500 firms using all three approaches and find that stock repurchases have on average increased average annual returns by almost 2% and geometric returns by +1.6% per annum, whilst new share issuance reduces average returns by 1.1% a year. We also find similar results at the aggregate portfolio level. We argue that investors should be concerned about total shareholder flows and not the amount of cash distributed through any particular channel.

Suggested Citation

  • Brawn, Derek & Sevǐc, Aleksandar, 2015. "Net payout return: An alternative to the traditional returns approach based on dividends and share repurchases," Finance Research Letters, Elsevier, vol. 13(C), pages 66-73.
    • Handle: RePEc:eee:finlet:v:13:y:2015:i:c:p:66-73
    DOI: 10.1016/j.frl.2015.03.002
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    References listed on IDEAS

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    1. Eugene F. Fama & Kenneth R. French, 2001. "Disappearing Dividends: Changing Firm Characteristics Or Lower Propensity To Pay?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(1), pages 67-79, March.
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    Cited by:

    1. Benavides, Julian & Berggrun, Luis & Perafan, Hector, 2016. "Dividend payout policies: Evidence from Latin America," Finance Research Letters, Elsevier, vol. 17(C), pages 197-210.

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    More about this item

    Keywords

    Stock repurchase; Equity issuance; Dividends; Equity returns; Payout methods; Equity risk premium;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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