Ian Salisbury

When it comes to playing defense, investors have long focused on dividend stocks. They may not want to overlook dividends' twin, share buybacks, which can signal management is bullish about a company's prospects.

After a rough start to 2025, the S&P 500 is back up above 6,000. While that's a relief, a slowing economy and lingering trade problems mean investors may want to put their stock portfolios in a defensive stance.

Classic options are dividend funds such as Schwab U.S. Dividend Equity exchange-traded fund, or the ProShares S&P 500 Dividend Aristocrats ETF, which targets companies with yearslong track records of consistently making and raising their payouts.

But it also makes sense to pay attention to share repurchases -- an even more popular way for companies to return profits to shareholders. Last year, component companies of the S&P 500 spent $942 billion on buybacks, compared with $630 billion on dividends, according to S&P Global.

Companies favor buybacks in part because they are more tax-efficient for investors than dividends. Unless shares are held in a 401(k), investors need to pay tax on dividend income every year. The effect of buybacks, which boost share prices, only show up investors tax bills when they sell their shares, in the form of larger capital gains.

Buybacks can also provide a signal about a company's health. In theory, corporate managers devote cash to repurchasing shares when they think those shares are underpriced. When shares are fairly or overvalued, managers are more likely to invest the cash directly into their businesses or issue dividends.

With buybacks in mind, Wolfe Research recently ran a screen for companies with a history of steady buybacks, to help investors looking for defensive stock names.

"During economic slowdowns or recessionary environments, one of our favorite strategies is buying companies consistently buying back shares on a net basis (minimum 10 consecutive years)," wrote analyst Chris Senyek Wednesday. "This cohort of stocks has generally outperformed heading into and throughout recessions."

Wolfe's list contains more than 50 names. So we've singled out the 10 putative buyback aristocrats that Wolfe flags as also being dividend aristocrats.

The 10 companies are listed below. One note: "12-month buybacks" refers to the percentage of each company's average market capitalization it has retired by way of buybacks over the past 12 months.

Lowe's / LOW

Market cap: $126.6 billion

Year-to-date return: -8%

12-Month buybacks: 3%

Dividend Yield: 2%

Genuine Parts / GPC

Market cap: $17.5 billion

Year-to-date return: 9%

12-Month buybacks: 0.6%

Dividend Yield: 3.4%

Colgate-Palmolive / CL

Market cap: $75.5 billion

Year-to-date return: 3%

12-Month buybacks: 1.9%

Dividend Yield: 2.3%

Walmart / WMT

Market cap: $789.8 billion

Year-to-date return: 10%

12-Month buybacks: 0.8%

Dividend Yield: 1%

Aflac / AFL

Market cap: $56 billion

Year-to-date return: 1%

12-month buybacks: 5.4%

Dividend yield: 2.2%

Cardinal Health / CNH

Market cap: $36.9 billion

Year-to-date return: 32%

12-month buybacks: 3%

Dividend yield: 1.4%

AO Smith / AOS

Market cap: $9.1 billion

Year-to-date return: -5%

12-month buybacks: 3%

Dividend yield: 1.9%

W.W. Grainger / GWW

Market cap: $52 billion

Year-to-date return: 4%

12-month buybacks: 2.5%

Dividend yield: 0.9%

Illinois Tool Works / ITW

Market cap: $72 billion

Year-to-date return: -3%

12-Month buybacks: 2%

Dividend Yield: 2.4%

Automatic Data Processing / ADP

Market cap: $132.3 billion

Year-to-date return: 12%

12-Month buybacks: 1.3%

Dividend Yield: 2%

Source: Wolfe Research

Write to Ian Salisbury at ian.salisbury@barrons.com

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June 12, 2025 14:52 ET (18:52 GMT)

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