Income investors may combine dividends and buybacks to boost 2026 performance

Morningstar strategist Dan Lefkovitz says income-focused investors might consider combining dividend-paying stocks with firms that repurchase shares; S&P 500 buybacks topped $1 trillion over the 12 months through September 2025, according to S&P Dow Jones Indices.

Morningstar strategist Dan Lefkovitz suggests income-focused investors look beyond steady dividend payers and consider combining dividend-paying stocks with companies that repurchase shares. Buybacks among S&P 500 companies topped $1 trillion over the 12 months through September 2025, according to S&P Dow Jones Indices. In the third quarter alone, companies bought $249 billion of their own shares. The article notes that including buybacks can produce a portfolio that is closer to the market than one made up only of dividend payers. Key facts: - S&P Dow Jones Indices reported S&P 500 buybacks of about $1 trillion over the 12 months through September 2025, with $249 billion in the third quarter. - Morningstar's U.S. Dividend and Buyback index posted a 16.2% annual return over the three years ending Dec. 19; the Morningstar U.S. High Dividend Yield index returned 13.4% and the Morningstar U.S. Market index returned 22.8% in the same period. - The article mentions Apple, Nvidia, Alphabet and Meta Platforms together accounted for $55.2 billion of S&P 500 buybacks in the third quarter. - Financial services, industrials, utilities, energy and consumer staples are identified as sectors that more commonly pay steady dividends. - The article notes the U.S. market dividend yield is around 1.1% while yields can top 3% in Europe, and mentions new buyback programs announced by Okta ($1 billion) and Veeva Systems (up to $2 billion) as 2026 begins. Summary: The article frames buybacks as a complementary source of shareholder returns and reports that Morningstar's combined dividend-and-buyback index has outperformed a high-dividend-only index over the recent three-year stretch. It also highlights sector differences and lower U.S. dividend yields compared with some overseas markets, and it cautions that unusually high yields can reflect elevated risk. Undetermined at this time.