America's biggest corporations rewarded shareholders by spending more money on stock repurchases for the eighth consecutive quarter.
Standard & Poor's Indices on Tuesday said stock repurchases by companies in the S&P 500 index rose 41 percent in the April-June period, growing to more than $109 billion from nearly $78 billion in last year's second quarter. Buybacks rose 22 percent compared with this year's first quarter, when the total was nearly $90 billion.
Buybacks have increased each quarter since the second quarter of 2009, when the financial crisis sent buyback spending down to $24 billion. That was the lowest level since S&P began recording such data in 1998.
Buybacks reward investors by increasing the value of remaining shares, and per-share earnings results, as shares are taken off the market, and earnings are divided among fewer shares.
S&P analyst Howard Silverblatt said companies have recently been using buybacks to prevent dilution to the value of existing shares resulting from stock options issued through employee compensation programs, and through dividend reinvestment programs.
Many companies are in good position to buy back shares because they have been building up cash holdings exiting the Great Recession, which officially ended in mid-2009. S&P 500 companies have set a new record for cash holdings in each of the past 11 quarters. In this year's second quarter, companies had $976 billion in cash, up from $963 billion in the first quarter.
In the second quarter, information technology companies continued to be the most aggressive at buying backstock. The sector's $24 billion total accounted for more than one-fifth of all buybacks, or 22 percent, down slightly from info tech's 23 percent share of buybacks in the first quarter. Hewlett-Packard Co. was the most active information tech company in the latest quarter, buying back $4.6 billion worth of shares, followed by IBM Corp. with $4 billion.
Among all companies, the biggest was Exxon Mobil Corp. with $5.5 billion in buybacks. That was down slightly from the $5.7 billion that the energy heavyweight spent in the first quarter.
Exxon Mobil's current buyback program has reduced the company's count of outstanding shares by nearly 19 percent over the past five years, or $129 billion, S&P said. That program is one reason why Apple Inc. last month surpassed Exxon Mobil to become America's most valuable company, based on the value of its shares on the market. Apple's market cap on Tuesday was about $389 billion, compared with $363 billion for Exxon Mobil.
Financial companies posted the largest increase in buyback activity among market sectors in the latest quarter, with $14.4 billion in buybacks. That was nearly double the $7.3 billion in buybacks in the first quarter. The biggest quarterly buyback total among financial companies was the $3.5 billion spent by JPMorgan Chase & Co.
Despite the heightened buyback activity over the past 24 months, buybacks remain below their historic peak in the third quarter of 2007, when repurchases totaled a record $172 billion.
For the third quarter of 2011, Silverblatt expects buybacks to remain steady at around $110 billion.
He didn't offer a fourth-quarter forecast: "The fourth quarter will depend, as so many things will, on the economy," he said.