Believe it or not, the S&P 500 returns something like 90%+ of net income to shareholders. That’s because net income is after R&D spend etc. is accounted for.

Believe it or not, the S&P 500 returns something like 90%+ of net income to shareholders. That’s because net income is after R&D spend etc. is accounted for. The argument for retaining net income is that you have future capital expenses that you want to save for (like factories or servers), but that’s an increasingly less pressing need for modern companies. Given the above, companies can choose to return that net income as cash, but then shareholders have to redeploy immediately (and potentially in competitors’ stocks/bonds) OR companies can choose to buy back and burn their own shares, allowing shareholders to defer any decisions and keeping all capital locked up in the company’s stock.