US companies increase spending on stock buybacks

NEW YORK — America's biggest corporations are spending more money on stock repurchases to keep investors happy.

Standard & Poor's said Wednesday that stock buybacks in the first quarter rose 63 percent to $89.8 billion. That's up from $55.3 billion in the year-ago period.

Despite the increase, S&P 500 companies are mainly using stock buybacks to protect the value of the company's shares, said Howard Silverblatt, a senior analyst for S&P. Stock buyback programs indicate companies have enough cash to take their shares off the market. That in turn increases the value of the remaining shares and per-share earnings results.

Stock repurchases increased 4 percent in the first quarter from the previous quarter, according to S&P. But stock prices over that time rose by an average of 8 percent, indicating that companies snapped up fewer shares even while spending more money on buybacks. That means companies are using buybacks primarily to control employee options and shares used for dividend reinvestment programs, Silverblatt said.

The stockpile of cash companies are sitting on meanwhile continues to grow. S&P companies have set a new record for cash holdings in each of the past 10 quarters. In the first quarter of this year, companies had $963 billion in cash.

"They've got a ton of cash they're not spending," Silverblatt said. "There's no history of them having so much money sitting on their books."

Buybacks are nevertheless up for the seventh quarter in a row. The number of companies taking part in stock buyback programs has also been increasing as well. In the first quarter, 305 companies repurchased their shares. That's up from 270 companies in the previous quarter and 261 companies in the third quarter.

The information technology sector continued to dominate the buyback market, accounting for 23 percent of all buybacks. Consumer discretionary companies

Exxon Mobil maintained its top position in the buyback market, spending $5.7 billion in the first quarter. International Business Machines and Intel Corp. each spent $4 billion, Hewlett-Packard Co. spent $2.7 billion and Wal-Mart Stores Inc. spent $2.1 billion.

The continuing recovery in the buyback market is still far short of the high set in the third quarter of 2007, when companies spent $172 billion repurchasing shares. Companies then began cutting spending on buybacks until repurchases reached a low of $24.2 billion in the second quarter of 2009.