By Ketki Saxena
Investing.com -- Companies listed on Canada's benchmark stock index, the TSX, distributed an unprecedented $170 billion to shareholders over the past year - surpasses payouts provided by firms within the S&P 500 index for the first time in a quarter century, as per CIBC (TSX:CM) Capital Markets analysts.
The payout yield for Canadian companies peaked at a record-breaking 5.5% earlier this year, outdoing the highest yield of 5.0% offered by the renowned S&P 500 index.
"Canadian buybacks have soared," Ian de Verteuil, managing director of equity markets, says "For the first time in the last quarter century, payout yield (dividends plus buybacks divided by price) for the S&P/TSX exceeded that offered by the S&P 500."
De Verteuil attributes this surge in stock repurchases among Canadian enterprises to several factors. Notably, Ottawa's upcoming two per cent Federal Buyback Tax — slated for implementation in January 2024 — has accelerated such activities.
Additionally, he highlights robust earnings and cash flow experienced across numerous TSX-listed businesses—particularly those operating within resource sectors—as another driving force behind these trends.
However, CIBC analysts predict that a combination of factors—such as lower commodity prices, increased capital reserve ratios at banking institutions, and the impending introduction of the buyback tax next year—will likely contribute to reduced payouts moving forward.
De Verteuil projects that future payouts will decline to approximately $140 billion—representing a payout yield of around 4.4%.