Since the 1990s, U.S. companies have returned more capital through stock buybacks than dividends. An investor focused solely on dividend yield is missing the larger part of the shareholder return story and cannot accurately assess a company's total capital allocation strategy.

For two decades, Domino's translated modest top-line growth into impressive earnings-per-share growth through aggressive share buybacks. This highlights how effective capital allocation can be a primary value driver in a mature, cash-generative business, even more so than revenue growth itself.

The argument that Disney's market cap is less than its acquisition costs presents a flawed picture of value creation. This analysis fails to account for the approximately $70 billion returned to shareholders via dividends and buybacks over the same period. A true assessment of an M&A strategy's success must include capital returned, not just final enterprise value.

Domino's has negative $4 billion in shareholder equity. This isn't from unprofitability but from systematically returning more cash to shareholders via debt-funded buybacks than it retains. This financial structure makes traditional metrics like Return on Equity (ROE) useless for analysis.

A 1% dividend yield seems historically low, but it's misleading. Including share buybacks, the total cash payout to shareholders is about 4%, in line with historical averages. Professor Ibbotson frames buybacks as a modern, more tax-efficient financial innovation for returning capital to shareholders.

The stock market has fundamentally transformed. From the nation's founding until the 1980s, it was a dividend-generating vehicle, with income comprising 96% of total returns. Since then, it has become almost purely an instrument for price appreciation, a completely different function.

Despite S&P 500 companies spending over a trillion dollars on share repurchases, the aggregate share count has not meaningfully decreased in 25 years. These buybacks primarily serve to counteract the massive stock dilution from executive compensation, creating an illusion of shareholder return while enriching insiders and levitating stock prices.

Companies termed "share cannibals" aggressively repurchase their own shares, especially when undervalued. This capital allocation strategy is often superior to dividends because it transfers value from sellers to long-term shareholders and acts as a high-return, low-risk investment in the company's own business.

UK fund managers, needing cash to meet investor redemptions, pressure their portfolio companies to pay dividends. This ignores more accretive capital allocation strategies like share buybacks, contributing to persistent undervaluation across the market.