Buyback Yield
Dollars spent on share repurchases divided by market capitalization. The buyback equivalent of dividend yield — measures cash returned to shareholders via repurchases rather than dividends.
When to use: Use to capture the often-larger half of cash returned to shareholders. US large-cap companies routinely buy back 2-5% of their market cap per year — frequently exceeding their dividend yield. Plays a central role in shareholder yield.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| BuybackYield | Buyback Yield | Repurchase spend ÷ market cap, as a decimal | % |
| BuybackSpend | Buyback Spend | Dollars spent on share repurchases | $ |
| MarketCap | Market Cap | Equity market capitalization | $ |
Real-Life Examples
Example 1: Mega-Cap Repurchaser
Company spent $20B on buybacks during the year. Market cap $500B.
Given
Step-by-Step
4% buyback yield. Combined with a typical 1-2% dividend yield, this becomes 5-6% in total cash returned annually — competitive with bond yields and the bulk of total return for many mature US large-caps.
Frequently Asked Questions
For a precise read, yes — net buyback yield = (Buybacks − New Issuance) / Market Cap. Companies that buy back $10B but issue $5B in stock-based compensation only return $5B net. Gross buyback yield overstates real return-of-capital.
Only when shares are bought below intrinsic value. Buybacks at peak valuations destroy value (you would not voluntarily buy a stock at the peak — neither should the company). Look at the price level and timing of repurchases, not just the dollar amount.
Tax-efficient (no taxable event for non-selling holders), more flexible (can be turned off in downturns), but less reliable (often pro-cyclical). A balanced shareholder-return policy uses both.