Ever wondered what happens if you try to take $50,000 in cash out of a bank? Answer: a year of investigative journalism.

In my ninth (and last) data post for 2025, I look at cash returned by businesses across the world, looking at both the magnitude and the form of that return. I start with a framework for thinking about how much cash a business can return to its owners, and then argue that, in the real world, this decision is skewed by inertia and me-tooism. I also look at a clear and discernible shift away from dividends to stock buybacks, especially in the US, and examine both good and bad reasons for this shift. After reporting on the total cash returned during the year, by public companies, in the form of dividends and buybacks, I scale the cash returned to earnings (payout ratios) and to market cap (yield) and present the cross sectional distribution of both statistics across global companies. The Cash Return Decision     The decision of whether to return cash, and how much to return, should, at least in principle, be the simplest of the three corporate finance decisions, since it does not involve the estimation uncertainties that go with investment decisions and the angst of trading of tax benefits against default risk implicit in financing decisions. In practice, though, there is probably more dysfunctionality in the cash return decision, than the other two, partly driven by deeply held, and often misguided views, of what returning cash to shareholders does or does not do to a business, and partly by the psychology that returning cash to shareholders is an admission that a company's growth days are numbered. In this section, I will start with a utopian vision, where I examine how cash return decisions should play out in a business and follow up with the reality, where bad dividend/cash return decisions can drive a business over a cliff.  The Utopian Version     If, as I asserted in an earlier post, equity investors have a claim the cash flows left over after all needs (from taxes to debt payments to reinvestment needs) are met, dividends should represent the end effect of all of those choices. In fact, in the utopian world where dividends are residual cash flows, here is the sequence you should expect to see at businesses: In a residual dividend version of the world, companies will start with their cash flows from operations, supplement them with the debt that they think is right for them, invest that cash in good projects and the cash that is left over after all these needs have been met is available for cash return. Some of that cash will be held back in the company as a cash balance, but the balance can be returned either as dividends or in buybacks. If companies following this sequence to determine, here are the implications: The cash returned should not only vary from year to year, with more (less) cash available for return in good (bad) years), but also across firms, as firms that struggle on profitability or have large reinvestment needs might find that not only do they not have any cash to return, but that they might have to raise fresh capital from equity investors to keep going.  It also follows that the investment, financing, and dividend decisions, at most firms, are interconnected, since for any given set of investments, borrowing more money will free up more cash flows to return to shareholders, and for any given financing, investing more back into the business will leave less in returnable cash flows.      Seen through this structure, you can compute potential dividends simply by looking for each of the cash flow elements along the way, starting with an add back of depreciation and non-cash charges to net income, and then netting out investment needs (capital expenditures, working capital, acquisitions) as well as cash flow from debt (new debt) and to debt (principal repayments).  While this measure of potential dividend has a fanciful name (free cash flow to equity), it is not only just a measure of cash left in the till at the end of the year, after all cash needs have been met, but one that is easy to compute, since every items on the list above should be in the statement of cash flows.     As with almost every other aspect of corporate finance, a company's capacity to return cash, i.e., pay potential dividends will vary as it moves through the corporate life cycle, and the graph below traces the path: There are no surprises here, but it does illustrate how a business transitions from being a young company with negative free cash flows to equity (and thus dependent on equity issuances) to stay alive to one that has the capacity to start returning cash as it moves through the growth cycle before becoming a cash cow in maturity. The Dysfunctional Version     In practice, though, there is no other aspect of corporate finance that is more dysfunctional than the cash return or dividend decision, partly because the latter (dividends) has acquired characteristics that get in the way of adopting a rational policy. In the early years of equity markets, in the late 1800s,  companies wooed investors who were used to investing in bonds with fixed coupons, by promising them predictable dividends as an alternative to the coupons. That practice has become embedded into companies, and dividends continue to be sticky, as can be seen by the number of companies that do not change dividends each year in the graph below: While this graph is only of US companies, companies around the world have adopted variants of this sticky dividend policy, with the stickiness in absolute dividends (per share) in much of the world, and in payout ratios in Latin America. Put simply, at most companies, dividends this year will be equal to dividends last year, and if there is a change, it is more likely to be an increase than a decrease.     This stickiness in dividends has created several consequences for firms. First, firms are cautious in initiating dividends, doing so only when they feel secure in their capacity to keep generate earnings. Second, since the punishment for deviating from stickiness is far worse, when you cut dividends, far more firms increase dividends than decrease them. Finally, there are companies that start paying sizable dividends, find their businesses deteriorate under them and cannot bring themselves to cut dividends. For these firms, dividends become the driving force, determining financing and investment decisions, rather than being determined by them. This is, of course, dangerous to firm health, but given a choice between the pain of announcing a dividend suspension (or cut) and being punished by the market and covering up operating problems by continuing to pay dividends, many managers choose the latter, laying th e pathway to dividend madness. Dividends versus Buybacks      As for the choice of how to return that cash, i.e., whether to pay dividends or buy back stock, the basics are simple. Both actions (dividends and buybacks) have exactly the same effect on a company’s business picture, reducing the cash held by the business and the equity (book and market) in the business. It is true that the investors who receive these cash flows may face different tax consequences and that while neither action can create value, buybacks have the potential to transfer wealth from one group of shareholders (either the ones that sell back or the ones who hold on) to the other, if the buyback price is set too low or too high.         It is undeniable that companies, especially in the United States, have shifted away from a policy of returning cash almost entirely in dividends until the early 1980s to one where the bulk of the cash is returned in buybacks. In the chart below, I show this shift by looking at the aggregated dividends and buybacks across S&P 500 companies from the mid-1980s to 2024: While there are a number of reasons that you can point to for this shift, including tax benefits to investors, the rise of management options and shifting tastes among institutional investors, the primary reason, in my view, is that sticky dividends have outlived their usefulness, in a business age, where fewer and fewer companies feel secure about their earning power. Buybacks, in effect, are flexible dividends, since companies, when faced with headwinds, quickly reduce or cancel buybacks, while continuing to pay dividends: In the table below, I look at the differences between dividends and buybacks: If earnings variability and unpredictability explains the shifting away from dividends, it stands to reason that this will not just be a US phenomenon, and that you will see buybacks increase across the world. In the next section, we will see if this is happening.     There are so many misconceptions about buybacks that I did write a piece that looks in detail at those reasons. I do want to reemphasize one of the delusions that both buyback supporters and opponents use, i.e., that buybacks create or destroy value. Thus, buyback supporters argue that a company that is buying back its own shares at a price lower than its underlying value, is effectively taking an investment with a positive net present value, and is thus creating value. That is not true, since that action just transfers value from shareholders who sell back (at the too low a price) to the shareholders who hold on to their shares. Similarly, buyback opponents note that many companies buy back their shares, when their stock prices hit new highs, and thus risk paying too high a price, relative to value, thus destroying value. This too is false, since paying too much for shares also is a wealth transfer, this time from those who remain shareholders in the firm to those who sell back their shares.  Cash Return in 2024     Given the push and pull between dividends as a residual cash flow, and the dysfunctional factors that cause companies to deviate from this end game, it is worth examining how much companies did return to their shareholders in 2024, across sectors and regions, to see which forces wins out. Cash Return in 2024     Let's start with the headline numbers. In 2024, companies across the globe returned $4.09 trillion in cash to their shareholders, with $2.56 trillion in dividends and $1.53 trillion taking the form of stock buybacks. If you are wondering how the market can withstand this much cash being withdrawn, it is worth emphasizing an obvious, but oft overlooked fact, which is that the bulk of this cash found its way back into the market, albeit into other companies. In fact, a healthy market is built on cash being returned by some businesses (older, lower growth) and being plowed back into growth businesses that need that capital.     That lead in should be considered when you look at cash returned by companies, broken down by sector, in the table below, with the numbers reported both in US dollars and scaled to the earnings at these companies: To make the assessment, I first classified firms into money making and money losing, and aggregated the dividends and buybacks for each group, within each sector.  Not surprisingly, the bulk of the cash bering returned is from money making firms, but the percentages of firms that are money making does vary widely across sectors. Utilities and financials have the highest percentage of money makers on the list, and financial service firms were the largest dividend payers, paying $620.3 billion in dividends in 2024, followed by energy ($346.2 billion) and industrial ($305.3 billion). Scaled to net income, dividend payout ratios were highest in the energy sector and technology companies had the lowest payout ratios. Technology companies, with $280.4 billion, led the sectors in buybacks, and almost 58% of the cash returned at money making companies in the sector took that form.     Breaking down global companies by region gives us a measure of variation on cash return across the world, both in magnitude and in the type of cash return: It should come as no surprise that the United States accounted for a large segment (more than $1.5 trillion) of cash returned by all companies, driven partly by a mature economy and partly by a more activist investor base, and that a preponderance of this cash (almost 60%) takes the form of buybacks. Indian companies return the lowest percentage (31.1%) of their earnings as cash to shareholders, with the benign explanation being that they are reinvesting for growth and the not-so-benign reason being poor corporate governance. After all, in publicly traded companies, managers have the discretion to decide how much cash to return to shareholders, and in the absence of shareholder pressure, they, not surprisingly, hold on to cash, even if they do not have no need for it. It is also interesting that buybacks seems to be making inroads in other paths of the world, with even Chinese companies joining the party. FCFE and Cash Return     While it is conventional practice to scale dividends to net income, to arrive at payout ratios, we did note, in the earlier section, that you can compute potential dividends from financial statements, Here again, I will start with the headline numbers again. In 2024, companies around the world collectively generated $1.66 trillion in free cash flows to equity: As you can see in the figure, companies started with net income of $6,324 billion, reinvested $4,582 billion in capital expenditures and debt repayments exceeded debt issuances by $90 billion to arrive at the free cash flow to equity of $1.66 trillion. That said, companies managed to pay out $2,555 billion in dividends and bought back $1,525 billion in stock, a total cash return of almost $4.1 trillion.     As the aggregate numbers indicate, there are many companies with cash return that does not sync with potential dividends or earnings. In the picture below, we highlight four groups of companies, with the first two focused on dividends, relative to earnings, and the other two structured around cash returned relative to free cash flows to equity, where we look at mismatches. Let's start with the net income/dividend match up. Across every region of the world, 17.5% of money losing companies continue to pay dividends, just as 31% of money-making companies choose not to pay dividends. Using the free cash flows to equity to divide companies, 38% of companies with positive FCFE choose not to return any cash to their shareholder while 48% of firms with negative FCFE continue to pay dividends. While all of these firms claim to have good reasons for their choices, and I have listed some of them, dividend dysfunction is alive and well in the data.     I argued earlier in this post that cash return policy varies as companies go through the life cycle, and to see if that holds, we broke down global companies into deciles, based upon corporate age, from youngest to oldest, and looked at the prevalence of dividends and buybacks in each group: As you can see, a far higher percent of the youngest companies are money-losing and have negative FCFE, and it is thus not surprising that they have the lowest percentage of firms that pay dividends or buy back stock. As companies age, the likelihood of positive earnings and cash flows increases, as does the likelihood of dividend payments and stock buybacks. Conclusion     While dividends are often described as residual cash flows, they have evolved over time to take on a more weighty meaning, and many companies have adopted dividend policies that are at odds with their capacity to return cash. There are two forces that feed this dividend dysfunction. The first is inertia, where once a company initiates a dividend policy, it is reluctant to back away from it, even though circumstances change. The second is me-tooism, where companies adopt cash return policies to match  their peer groups, paying dividends because other companies are also paying dividends, or buying back stock for the same reasons. These factors explain so much of what we see in companies and markets, but they are particularly effective in explaining the current cash return policies of companies. YouTube Data Updates for 2025 Data Update 1 for 2025: The Draw (and Danger) of Data! Data Update 2 for 2025: The Party continued for US Equities Data Update 3 for 2025: The times they are a'changin'! Data Update 4 for 2025: Interest Rates, Inflation and Central Banks! Data Update 5 for 2025: It's a small world, after all! Data Update 6 for 2025: From Macro to Micro - The Hurdle Rate Question! Data Update 7 for 2025: The End Game in Business! Data Update 8 for 2025: Debt, Taxes and Default - An Unholy Trifecta! Data Update 9 for 2025: Dividend Policy - Inertia and Me-tooism Rule! Data Links Dividend fundamentals, by industry (US, Global, Emerging Markets, Europe, Japan, India, China) Cash return and FCFE, by industry (US, Global, Emerging Markets, Europe, Japan, India, China)

From ADP: ADP National Employment Report: Private Sector Employment Increased by 77,000 Jobs in February; Annual Pay was Up 4.7% “Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month,” said Nela Richardson, chief economist, ADP. “Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.” This was below the consensus forecast of 140,000. The BLS report will be released Friday, and the consensus is for 158,000 non-farm payroll jobs added in February.

These are difficult realities without Hollywood cliche answers. Caregivers and the costs of caregiving don't get much attention. They're not part of the news flow, and the day-to-day grind of caregiving doesn't lend itself to the self-promotional zeitgeist of social media. Look at me, helping Mom on her walker is not going to score big numbers online. The burdens in human and financial terms are often crushing. These realities are generally obscured by taboos and Hollywood cliches: it's considered bad form to describe the burdens of caregiving, and anyone who dares to do so is quickly chided: "You're lucky your parent is still alive so you can spend quality time together." Meanwhile, back in the real world, 4 in 10 family caregivers rarely or never feel relaxed, according to a 2023 AARP survey, as an integral part of caregiving is being on constant alert for something untoward happening to the elderly person in one's care. The demographics are sobering: we're living longer, often much longer, than previous generations, and in greater numbers. This means 65-year olds are caring for 85-year olds and 70-year olds are caring for 90+-year olds. I've logged 8+ years of caregiving (5+ years here at home) from age 63 to 70 caring for my mom-in-law, so I have personal experience of being old enough to "retire" but retirement is a fantasy for caregivers. Our neighbors are 80+ years of age and they're caring for her 102-year old Mom. What's this retirement thing people talk about so cheerily? All these realities are abstractions until they happen to you. These burdens are seeping down to Gen X and the Millennial generation. 'It's a job, and a tough one': the pain and privilege of being a millennial caregiver. The financial costs of care are staggering. A bed in private assisted living is around $75,000 and up a year, a private room in a nursing home is around $150,000 a year, and round-the-clock care at home costs from $150,000 to $250,000+ annually. The Crushing Financial Burden of Aging at Home (WSJ.com) "Christine Salhany spends about $240,000 a year for 24-hour in-home care for her husband who has Alzheimer's. In Illinois, Carolyn Brugioni's dad exhausted his savings and took out a home-equity line-of-credit to pay for home healthcare." More than 11,000 people in the U.S. are turning 65 every day and the vast majority--77% of Americans age 50 and older according to an AARP survey--want to live as long as possible in their current home. At some point, many will need help. About one-fourth of those 65 and older will eventually require significant support and services for more than three years, according to the Center for Retirement Research at Boston College. About one-third of retirees don't have resources to afford even a year of minimal care, according to the Boston College center. "The new inheritance is not having enough money to give to kids but to have enough money to cover long-term care costs, says Liz O'Donnell, the Boston-based founder of Working Daughter, an online community of caregivers. The costs of home care are so high that not just inheritances are exhausted; the home equity is also drained. $350,000 sounds like a lot of money but that might cover two years in a nursing home but not be enough to cover two years of round-the-clock care at home. The cost of maintaining the home doesn't go away: property taxes, insurance and maintenance expenses must be paid, too. Those without monumental financial resources make do by doing everything themselves. Depending on the resources available in the community, there may be some minimal assistance such as weekly visits by a nurse, meals delivered, and adult day-care facilities, but there are no guarantees any of these are available or that the family qualifies. In other words, the idea that the retired generation will leave ample inheritances is increasingly detached from reality. As noted, the new inheritance is to get through the years of caregiving without acquiring debt. The human costs are high, too. In the Hollywood cliche, everyone adapts and makes the best of it, and there's plenty of Hallmark moments that make it all worthwhile. Yes, there are Hallmark moments, but the elderly person misses their independence and may feel resentment that they no longer control how things are done. The caregivers are often exhausted--especially if they're 65 or older--and despite their best efforts may feel resentment at ending their careers early and sacrificing their own last best years caring for a decidedly unstellar parent who doesn't seem to appreciate the immense sacrifices being made on their behalf. The indignities of extreme old age weigh on the elderly, and the 65+ caregivers worry that they can't pick Mom or Dad up now that they're so old that they have their own infirmities. The responsible parent frets at the expense and feels bad they won't be able to pass on much to their grandkids. They may express guilt at being a burden, though that is beyond their control. The responsible adult child is burning out trying to juggle three generations and keep themselves glued together enough to keep functioning. They can't help but want their own life back, but to say this out loud is taboo because if life gives you lemons, make lemonade. In other words, tell us a happy story, repeat an acceptable cliche or say nothing. Nobody wants to hear any of this, and so the caregiver develops a self-contained stoicism. Everyone with no experience of caregiving wants to hear the Hollywood version, and so conversations with other caregivers are the only moments where the truth can be expressed and heard. In the rest of "normal life," the caregiver quickly learns to say what's expected: "We're managing. Life's good." This cultural taboo means the difficult realities that will multiply as 68 million Boomers age will come as an unwelcome surprise. Everyone wants to end their lives at home, we all understand this. While the fortunate elderly die peacefully at home after a brief illness, the less fortunate require levels of care that soon exhaust people and bank accounts. The burdens of caring for the remaining Silent Generation are high, but what about the 60 million retiree tsunami of the Boomer generation? As the general health of the American public declines, how many people will be healthy enough to care for their very elderly parents or grandparents? Who will do the often thankless work of caring for the very elderly at home and in nursing homes? These are difficult realities without Hollywood cliche answers. The fantasy is that 60 million very elderly will be tended by robots, All Watched Over by Machines of Loving Grace. But this isn't realistic, despite all the giddy claims. The American zeitgeist rejects problems for which there is no facile technological solution. But reality isn't a narrative, and the elderly person who fell and can't get up wants a bit of caring and sympathy, and the aging child wants to help their parent. That it isn't easy to do so requires a stoicism worthy of Marcus Aurelius. "You have power over your mind--not outside events. Realize this, and you will find strength." "Accept the things to which fate binds you, and love the people with whom fate brings you together, but do so with all your heart." "Never let the future disturb you. You will meet it, if you have to, with the same weapons of reason which today arm you against the present." All Watched Over By Machines Of Loving Grace by Richard Brautigan I like to think (and My recent books: Disclosure: As an Amazon Associate I earn from qualifying purchases originated via links to Amazon products on this site. 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Fed's Beige Book Overall economic activity rose slightly since mid-January. Six Districts reported no change, four reported modest or moderate growth, and two noted slight contractions. Consumer spending was lower on balance, with reports of solid demand for essential goods mixed with increased price sensitivity for discretionary items, particularly among lower-income shoppers. Unusual weather conditions in some regions over recent weeks weakened demand for leisure and hospitality services. Vehicle sales were modestly lower on balance. Manufacturing activity exhibited slight to modest increases across a majority of Districts. Contacts in manufacturing, ranging from petrochemical products to office equipment, expressed concerns over the potential impact of looming trade policy changes. Banking activity was slightly higher on balance among Districts that reported on it. Residential real estate markets were mixed, and reports pointed to ongoing inventory constraints. Construction activity declined modestly for both residential and nonresidential units. Some contacts in the sector also expressed nervousness around the impact of potential tariffs on the price of lumber and other materials. Agricultural conditions deteriorated some among reporting Districts. Overall expectations for economic activity over the coming months were slightly optimistic. Labor Markets Employment nudged slightly higher on balance, with four Districts reporting a slight increase, seven reporting no change, and one reporting a slight decline. Multiple Districts cited job growth in health care and finance, while employment declines were reported in manufacturing and information technology. Labor availability improved for many sectors and Districts, though there were occasional reports of a tight labor market in targeted sectors or occupations. Contacts in multiple Districts said rising uncertainty over immigration and other matters was influencing current and future labor demand. Wages grew at a modest-to-moderate pace, which was slightly slower than the previous report, with several Districts noting that wage pressures were easing. Prices Prices increased moderately in most Districts, but several Districts reported an uptick in the pace of increase relative to the previous reporting period. Input price pressures were generally greater than sales price pressures, particularly in manufacturing and construction. Many Districts noted that higher prices for eggs and other food ingredients were impacting food processors and restaurants. Reports of substantial increases in insurance and freight transportation costs were also widespread. Firms in multiple Districts noted difficulty passing input costs on to customers. However, contacts in most Districts expected potential tariffs on inputs would lead them to raise prices, with isolated reports of firms raising prices preemptively. emphasis added