BlackRock CEO warns top U.S. firms: don't overdo dividends, buybacks

March 26 Wed Mar 26, 2014 12:00am EDT

March 26 (Reuters) - BlackRock Inc Chief Executive Laurence Fink has warned top U.S. companies not to emphasize dividends or share buybacks if they come at the expense of future growth.

Many top corporations have faced pressure from Wall Street analysts, activist investors and others to increase their dividends, buy back shares or take other steps to return capital to investors sooner rather than later.

Fink, in a March 21 letter to the leaders of companies in the S&P 500, acknowledged the pressure for near-term performance but reminded companies that they must focus on the longer term. With $4.3 trillion under management at Dec. 31, BlackRock of New York wields much influence over the boards of top corporations.

"It concerns us that, in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies," he wrote in the letter, a copy of which was obtained by Reuters.

"Too many companies have cut capital expenditure and even increased debt to boost dividends and increase share buybacks," he added.

"We certainly believe that returning cash to shareholders should be part of a balanced capital strategy; however, when done for the wrong reasons and at the expense of capital investment, it can jeopardize a company's ability to generate sustainable long-term returns," Fink wrote.

Fink's letter was first reported by The Wall Street Journal. (Reporting by Ross Kerber; Editing by Miral Fahmy)