"P/Es are not very high right now, so it's accretive to earnings per share to buy back shares, and payout ratios are very low by historic standards, so they're probably going to get those up higher," Swanson said. "The level of cash coming back to the shareholders is on its way up."
S&P 500 companies offer a dividend yield, or stock price divided by the annual payment, of 1.84%, data tracked by Bloomberg show. That's below the average of 2.30% since 1971. Cisco and WellPoint Inc., an Indianapolis-based health insurer, are among the 10 companies in the S&P 500 that said they will start paying dividends this year, according to a March 22 report by S&P. That's the most for the first quarter since at least 2004.
Cisco, WellPoint
Cisco of San Jose, Calif., posted the first weekly gain in more than a month after announcing the payout, which equates to a 1.39% yield. WellPoint has jumped 6.2% since Feb. 23, when the company said it would begin a 25-cent dividend, compared with the S&P 500's 0.1% drop.
"Having this much cash on the balance sheet earning essentially nothing is hurting companies' numbers, it's hurting their return on equity, it's hurting their ability to provide income in the long run for investors," said David Kelly, who helps oversee about $445 billion as chief market strategist for JPMorgan Funds in New York. "If they can't find something better to do with it than leave it as cash, the best thing is to return it to shareholders."