Count me among the believers in Howard’s Silverblatt’s increasingly aggressive campaign against corporate stock buybacks.

Silverblatt, a senior index analyst at Standard & Poor’s, came out with new data on corporate dividend growth in the S&P 500, and it doesn’t look good. Just 448 of the 7,000 publicly owned companies in the U.S. raised their dividend payments in Q2 2007, a 7.2% decline from the number that boosted payouts in Q2 2006.

“The decline in dividend increases is disturbing, especially in light of continuing moderate earnings growth and the abundance of corporate cash,” Silverblatt said in a statement. “We believe the present wave of corporate buybacks is contributing to the slower pace of dividend growth in 2007."

Silverblatt has been a voice in the wilderness these past few years warning about the dark side of corporate stock buybacks. Silverblatt has cautioned that buybacks do not actually eliminate shares; instead, shares are simply places into corporate coffers, where they can be used for any purpose at any time.  The buybacks artificially boost earnings-per-share and improve other fundamental metrics.

The corporate flexibility doesn’t bother me so much, and even the boost to EPS measures seems fair. But I am concerned about buybacks, as they strike me as tantamount to deferred pay raises for corporate employees.  Whereas dividends are paid out to current shareholders, buybacks – by reducing the number of shares outstanding – represent payments to both current and future shareholders ... including the holders of vested and unvested stock options.

It seems like a blatant conflict-of-interest  for managers – who often hold large options positions – to make decisions about whether to buyback stock or boost dividend payments.  Is there a real rationale for favoring future shareholders over the shareholders of today? Is there a corporate justification for buybacks as opposed to dividends?