- S&P 500 companies are not only returning more cash to shareholders than their earnings, but also more than their cash flows.
- The trend is resembling the one prior to the financial crisis.
- Not all stocks are unsustainable with their cash returns, so check your portfolio.
A common piece of financial advice is not to spend more than you earn as it will eventually put you in trouble. Well, this is exactly what corporate managers are doing. Through dividends and buybacks they are spending more than they are earning. If the common advice is of any value it should be trouble ahead for the stocks that are doing so.
In this article we are going to analyze the situation, look at the real short and long term risks and conclude in fashion. More →