Companies in the S&P 500 bought back nearly $160 billion worth of their stock in the first quarter, according to S&P Capital IQ. If buybacks continue at this pace, the trailing 12-month total at the end of the second quarter will exceed the record $560 billion of buybacks in 2007.
Apple led the pack in the first quarter with roughly $18 billion worth of repurchases; IBM was in second place with just over $8 billion. In third place was Exxon Mobil, with just shy of $4 billion.
At a recent NeuGroup Treasurers’ Group of 30 meeting, members said stock buybacks would continue but they could be stopped or scaled back at any time in the event of a crisis (Capital Markets: Share Repurchase Trend Going Strong, May 16, 2014). Since stock buybacks are one of the drivers of the ongoing market rally, that should be a concern for investors.
Tech companies in the NeuGroup’s Tech20 Treasurers’ Peer Group also say buybacks are going strong. At the group’s mid-year meeting in April, members were told that markets remain very receptive to tech issuers – and that neither Fed tapering nor a timetable for rate hikes has changed this view. And with activist shareholders still pressuring tech firms for a return of cash, it helps that members still have the ability to issue debt to fund share repurchases and dividends.