The S&P 500’s Q3 of 2023 dividends increased 0.7% to a record $144.2 billion from Q2 of 2023’s $143.2 billion and were 2.7% higher than the $140.3 billion recorded in Q3 of 2022. For the 12-months ending in September 2023, dividends set a record $580.2 billion payment, up 5.0% on an aggregate basis from the year-ago period.
The quarter’s share repurchases were $185.6 billion, up 6.1% from Q2 of 2023’s record $174.9 billion expenditure. As many as 281 S&P 500 companies reported buybacks of at least $5 million for the quarter, down from 304 in Q2 of 2023 and down from 319 in Q3 of 2022.
About 428 companies repurchased some shares for the 12-months ending September 2023, down from 441 in the prior 12-month 2022 period. Buybacks remained top heavy with the top 20 S&P 500 companies accounting for 50.9% of Q3 2023 buybacks, down from Q2 2023’s 52.0% but still above the historical average of 47.3%.
Overall, the S&P 500’s dividend yield was 1.61% in Q3 of 2023 and the stock buyback yield was 2.19%, resulting in a combined yield of 3.81%. Against this backdrop, below we highlight a few sectors and its ETFs that offer outsized combined yield (buyback + dividend). This is especially true given investors must be looking forward to high-yielding investments currently thanks to a still-high inflation and higher interest rates.
Energy – Combined Yield 8.23%
The energy sector bought back $16.2 billion, representing 8.7% of all buybacks. For the 12-month period ending in September 2023, Energy spent $73.6 billion on buybacks, up 42.8% from the prior period’s $51.6 billion. The Zacks Rank #1 (Strong Buy) Energy Select Sector SPDR ETF XLE can be played to tap the high yield.
Communications Services – Combined Yield 5.75%
Communication Services buybacks were led by Alphabet, Meta Platforms, Comcast, T-Mobile US and Netflix. Communication Services Select Sector SPDR ETF XLC with a Zacks Rank #2 (Buy) is thus a great pick out here.
Financials – Combined Yield 4.71%
For Q3 of 2023, Financials spent $29.3 billion on buybacks, accounting for 15.8% of all S&P 500 buybacks, down from the Q2 2023 expenditure of $32.7 billion and the $46.9 billion from Q1 2023. For the 12-month September 2023 period, Financials spent $131.4 billion, down from $150.4 billion recorded in the year-ago period. Given the current banking environment and new regulatory requirements, Financials may cut their current buybacks as they again look to protect their dividends. Financial Select Sector SPDR ETF XLF has a Zacks Rank #1.
Materials – Combined Yield 4.12%
The sector logged 67% sequential increase in buyback in the third quarter of 2023. However, the buybacks fell 7% year over year. Share buyback made up 2.84% of the total S&P 500 buybacks. DuPont de Nemours mainly led the buybacks in the sector. Popular materials fund Materials Select Sector SPDR ETF XLB has a Zacks Rank #3 (Hold).
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Energy Select Sector SPDR ETF (XLE): ETF Research Reports
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
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