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S&P 500 stock buybacks hit record low

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S&P 500 stock buybacks have fallen to their lowest level since the first quarter of 1998, when Standard & Poor’s began tracking the data.
 

S&P 500 stock buybacks have fallen to their lowest level since the first quarter of 1998, when Standard & Poor’s began tracking the data.
 
According to Standard & Poor’s Index Services, preliminary results show that S&P 500 issues spent USD24.2bn on stock repurchases during the second quarter of 2009, representing a 72 per cent decline from the USD87.9bn spent during the second quarter of 2008, and an 86 per cent decline from the record USD172.0bn spent on stock buybacks during the third quarter of 2007.
 
‘Buybacks have become few and far between, falling out of favor with most investors as corporations continue to build-up cash reserves to ride them through, and out of, the recession,’ says Howard Silverblatt, senior index analyst at Standard & Poor’s. ‘At the height of the buyback bonanza in 2007, companies spent 180 per cent more on stock repurchases than they did on dividends. Now, even after dividend expenditures have decreased 22 per cent, buyback spending is just half that of dividends. Standard & Poor’s Index Services expects buybacks to remain weak for the foreseeable future, even as earnings are expected to improve.’
 
Standard & Poor’s also determined that during the second quarter of 2009, only 169 issues executed a stock buyback programme, compared to 288 during the second quarter of 2008. Additionally, none of the issues made the top 20 historical list for largest stock buybacks.
 
‘On the bright side, several big names continued their buyback initiatives during the second quarter,’ adds Silverblatt. ‘Exxon Mobil spent the most during the quarter, with USD5.2bn in buybacks accounting for over a fifth of the S&P 500’s entire buyback activity. Wal-Mart, which has increased its share repurchase programme, ranked second with USD1.9bn in buybacks. Other notables include Family Dollar Store, Staples and MedcoHealth Solutions.’
 
On a sector basis, Standard & Poor’s notes that all groups significantly reduced their buyback activity during the second quarter of 2009 with materials, telecommunications and utilities making just token purchases. Energy remained the biggest player, accounting for 22.1 per cent of all S&P 500 buybacks during the second quarter.

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