Capital Returns
We provide some historical perspective and deeper analysis on how companies return cash to shareholders.
Return of capital is part of return on capital. In other words, dividends and share repurchases have been significant drivers of equity performance over the long-term. Below, we provide some historical perspective and deeper analysis on how companies return cash to shareholders.
- In 2024, S&P 500 companies returned approximately $1.6 trillion to shareholders in the form of dividends and share repurchases, a 14% increase over the prior year. This represented 3.2% of the market value of the index, significantly higher than the 1.3% dividend yield alone.
- As the chart above shows, share repurchases from S&P 500 companies have generally been significantly larger than dividends paid, averaging 57% and 43%, respectively, as a percentage of capital returned to shareholders since 1998. Over the 12-months ending December 31, 2024, S&P 500 share repurchases totaled $943 billion, 50% greater than dividends of $630 billon. Historically, dividends have been more consistent than share repurchases as corporations have tried to honor their dividend commitments while being more tactical in their share repurchases.
- Over the past 50 years, dividends alone have accounted for more than a quarter of the S&P 500's total return.1 However, given that share repurchases can be larger than dividends, investors should assess the prospects for aggregate return of capital which is subject to the amount of free cash flow companies can produce. Our research shows that free cash flow generation relative to net income has been increasing over the long-term. In our view, the ability of today’s companies to generate strong free cash flow to fund both dividends and share repurchases should be a significant contributor to total shareholder returns in the future.
1 FactSet and Standard & Poor’s.
The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of May 2025. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
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The S&P 500® is an index of large company stocks considered to be representative of the U.S. stock market. The indices presented are provided for illustrative purposes, reflect the reinvestment of dividends and do not assess fees and expenses that would have the effect of reducing returns. Investors cannot invest directly in any index. The index performance does not represent the returns of any portfolio advised by Fred Alger Management, LLC and actual client results might differ materially than the indices shown. Note that past performance is no guarantee of future results. The S&P indexes are a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Fred Alger Management, LLC and its affiliates. Copyright 2025 S&P Dow Jones Indices LLC, a subsidiary of S&P Global Inc. and/ or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
FactSet is an independent source, which Alger believes to be a reliable source. FAM, however, makes no representation that it is complete or accurate.
Free cash flow is the cash a company generates after taking into consideration cash outflows that support its operations and maintain its capital assets.
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