Investors Are Becoming More "Bearish" - Seite 2

Some background helps put these findings into context. In 2015, nonfinancial companies in the S&P 500 returned more than a trillion dollars to shareholders -- share buybacks made up over 60% of the total, and dividends accounted for the rest. Buybacks have increased more than fourfold since 2009, accounting for roughly 3% of the average 8.5% growth in earnings per share. By contrast, capital expenditure budgets in the S&P 500 have grown only 44% over the same period.

"After a period in which companies returned record amounts of cash to shareholders, investors appear to be looking for companies to use that cash to improve the fundamental value of their businesses," said Jeffrey Kotzen, a BCG senior partner and global leader of the firm's Shareholder Value practice.

The findings also need to be understood in the context of companies' ongoing adjustment to a macroeconomic environment that, since the 2008-2009 global financial crisis, has been characterized by relatively low growth. "Companies have cut costs to improve profitability and free cash flow, taken advantage of low or even negative interest rates to increase leverage, boosted payouts in the form of dividends and share buybacks, and benefitted from valuation increases as capital markets have rebounded from their post-financial-crisis lows," said Frank Plaschke, a partner in BCG's Munich office.

The findings of the BCG survey, however, suggest that investors believe that these strategies have largely played themselves out. "Margins are currently at or near their peak, making additional improvements increasingly difficult," said Tim Nolan, a partner in the firm's New York office. "Returning cash to shareholders will continue to constitute a large percentage of TSR, on average, and provide a floor for valuation; but cash payouts alone won't deliver superior value. Finally, although interest rates have been low, they are likely to increase in the near future. All these factors mean that valuations will likely be under continued pressure."

In such an environment, investors want companies to focus on improving their fundamental-value engine: to put in place the managerial vision, organizational capabilities, and capital investments necessary to create a strong foundation for growth in the core business. "In a low-growth environment, this is an enormous challenge," said Kotzen. "But precisely because of this difficulty, delivering value-creating growth will likely be what distinguishes the superior value creators from the rest."