Companies have a number of ways in which to return capital to their shareholders. Two of the more popular ways in recent years are cash dividends and stock buybacks. 

Today's blog post shines a light on the huge disparity between the S&P 500 Index dividend payout and stock buyback activity in Q2'20. For comparative purposes, we include the dividend distributions and share buybacks for the past eight quarters.

The all-time high for the S&P 500 Index's quarterly dividend payout was the $127.0 billion distributed in Q1'20. The record for quarterly stock buybacks was the $223.0 billion registered in Q4'18, according to data from S&P Dow Jones Indices.

As indicated in the chart, the $88.7 billion in buyback activity posted in Q2'20 was dramatically lower than in recent quarters. It reflected a 55.4% plunge from the $198.7 billion repurchased in Q1'20 and was the lowest total since Q1'12.   

In Q2'20, 49% of S&P 500 Index companies executed buybacks, down from 79% in Q1'20, according to S&P Dow Jones Indices. It cited impact to sales, liquidity and business lines from the COVID-19 pandemic as reasons for the reduction in share repurchases. Significant buyback reductions are expected to continue in Q3'20.

The S&P 500 Index's dividend payout of $119.0 billion in Q2'20, while down from the previous three quarters, was up slightly on a year-over-year basis (see chart). We believe that companies, in general, are more likely to defend their dividend payout than their share repurchase plans. 

Overall, the companies in the S&P 500 Index are still flush with cash. In Q1'20, S&P 500 Industrials (Old) cash and equivalents stood at a record high $1.675 trillion. This figure does not include cash held by Financials, Real Estate, Utilities and Transports, which maintain high cash reserves as part of their normal operations.