Play defense with these dividend payers that consistently buy back their own shares, says Wolfe Research

Wolfe Research highlighted a "Consistent Buybacks" basket of stocks that have reduced share counts for at least 10 consecutive years as a defensive strategy in a volatile market. Featured names include Best Buy, Colgate-Palmolive, JPMorgan Chase, and Honeywell, each pairing buybacks with dividend yields of roughly 1.8% to 5.0%. The article also notes mixed company updates: Best Buy beat Q1 earnings and revenue, JPMorgan beat on Q1 EPS and revenue but cut net interest income guidance, and Honeywell beat EPS but missed revenue.

Analysis

The basket is really a quality-minus-beta screen disguised as a capital-return screen. In a choppy tape with inflation still sticky, the factor edge is less about absolute upside and more about companies with self-funding balance sheets that can absorb multiple compression while still returning capital; that should make these names relatively resilient if rates stay higher for longer or growth decelerates into Q3.

The second-order effect is that buyback durability often signals management confidence in free cash flow trajectory, but it also creates a structural bid that can mute drawdowns when positioning gets crowded. That matters most for consumer staples and healthcare-like defensives, where passive flows already provide support; in cyclicals like retail and industrials, the buyback bid can delay but not fully offset margin compression if demand weakens later this year.

The real dispersion is within the basket. BBY looks most exposed to a demand air pocket if consumer spending rolls over after the next inflation prints, while CL is the cleanest defensive compounder because pricing power and capital returns reinforce each other in a slower-growth regime. JPM is the most macro-sensitive: if net interest income has peaked, the buyback story becomes more of a valuation floor than an outright catalyst, whereas HON has a cleaner catalyst path tied to the post-spin re-rating but also the highest execution risk over the next 1-2 quarters.

Consensus is probably underestimating how much of this is a crowded-defensive trade rather than a fundamental inflection. If the upcoming PCE or labor data soften enough to pull yields down, the basket may outperform briefly, but the bigger edge is likely in owning the highest-quality repurchasers against shorts in balance-sheet-sensitive cyclicals rather than chasing the names outright.

Key Decisions for Investors

• Long CL / short XLP less-profitable staples basket for 1-3 months: prefer a quality-return compounder over the broader defensive ETF, with downside limited by CL’s pricing power and buyback support.
• Buy BBY put spreads 2-4 months out: consumer discretionary exposure plus management transition creates asymmetric downside if inflation-sensitive demand weakens after the next PCE prints.
• Maintain a tactical long HON into the spin-off date, but hedge with short-dated puts through the separation event: potential re-rating from pure-play automation, offset by execution risk and event-driven volatility.
• Pair long JPM vs short a regional-bank ETF over 6-12 weeks: JPM has stronger capital-return capacity and balance-sheet resilience, while the shorts are more exposed if recession odds rise and credit tightens.
• If yields drop after PCE, rotate into CL and HON rather than BBY: the former have better odds of sustained multiple support; BBY is the most likely to become a value trap if the consumer slows.