Stock buybacks in the fourth quarter fell by more than half, according to an analysis of Standard & Poor’s 500 index companies released today, as businesses hunkered down and preserved capital amid the ongoing recession.
S&P 500 companies spent $48.1 billion in stock repurchases during the final quarter of 2008, down 66 percent from the $141.7 billion spent during the prior year period. This marked the fourth straight quarter of declines, S&P said.
For the full year, buybacks reached $339.6 billion, compared with $589.1 billion in 2007.
“The need to conserve capital in the current recession, combined with the uncertainty of future cash flow, has made buybacks a high risk,” said Howard Silverblatt, senior index analyst at Standard & Poor’s in a statement.
He added that companies spent more on dividends than buybacks for the first time since the second quarter of 2004.
Since the fourth quarter of 2004, S&P 500 companies have spent about $1.78 trillion on stock buybacks, compared with $970 billion on dividends.
Buybacks declined significantly across all sectors, but particularly among consumer discretionary companies, which reduced activity by 88.9 percent. Exxon Mobil Corp. had the largest buyback in the fourth quarter, repurchasing $8.85 billion of its stock. Microsoft Corp., Oracle Corp., General Electric Co. and Morgan Stanley rounded out the top five companies in terms of buybacks.
Silverblatt said he expects buyback activity to remain weak in light of the ongoing downturn in the economy.
A stock buyback increases the number of shares a company owns and reduces the number of shares on the market.
When a company repurchases shares, it increases the value of earnings per share. (AP)
