The S&P 500 companies are spending every dollar of their operating earnings on dividends and buybacks of their own stock, according to a July 23 report by economist Ed Yardeni based on data from Standard and Poors. That means that as a whole, the S&P 500 is borrowing to hand cash back to shareholders, and investing nothing in ongoing businesses.

That  isn’t quite true, because the pattern is lopsided, to be sure: Amazon doesn’t buy back its stock or pay dividends, while Qualcomm returned funds to shareholders equal to seven times its earnings before interest, taxes, depreciation and amortization. Shown below are the constituents of the S&P 500 with the highest ratio of dividends+buybacks to EBITDA.

By Standard and Poor’s reckoning (using operating earnings as the denominator), the US stock market recalls 2008, just before the great crash, when money returned to shareholders climbed to 130% of operating earnings.

Cheap money is distorting corporate behavior. Despite the 2017 corporate tax cut, large US corporations as a group aren’t investing in their existing businesses, but milking them to return money to shareholders. They are taking advantage of cheap money in the leveraged loan market, keeping their share prices high by paying high per-share dividends. 

There is no immediate reason for this to come to an end. Investors are so hard pressed to find yield that they will buy high-dividend stocks without looking too closely at their vulnerability. A popular dividend stock (and one of this week’s best performers), Coca-Cola (K0), pays out 95% of earnings in the form of dividends. Philip Morris pays 94%. Exxon pays 76%. Utilities pay out 80%. 

Any slowing or contraction of the economy will result in dividend cuts. Any disruption of credit markets, moreover, would force many high dividend payers to retrench. Federal Reserve officials have pointed to the $3 trillion leveraged loan market as a likely source of trouble. For the time being, banks are too busy packing leveraged loans into complex structures (collateralized loan obligations), another echo of 2007. This can go on for some time, but not forever.

The US doesn’t appear in any near-term danger of recession. Although the Markit manufacturing purchasing managers’ index released Wednesday morning fell to 50, indicating zero growth, the Markit PMI for services fell slightly to 52.1, suggesting a modest degree of expansion. Markit also published its PMI for Germany on Wednesday, showing a steep fall to 43, well into contraction territory, while the German services index printed comfortably above 55.

This week’s earnings reports follow the bifurcation of goods-producing industries and services. UPS was Wednesday’s top performer, up more than 8%, after its US revenues for the second quarter exceeded market estimates. Caterpillar, the pacesetting US industrial, fell by 4.5% on disappointing earnings. 

Consumer staples, which pay high dividends and usually trade like bonds, were among the day’s worst performers, with losses varying from 2% for Phillip Morris to 1% for Coca Cola. This coincided with a gain of nearly 1% in the price of the US 30-year Treasury bond. The consumer staples stocks usually rise with long-term bonds, and reached record valuations as long-term interest rates fell this year. Investor resistance to the consumer staples sector despite rising bond prices is something of a warning sign.