Major companies' stock buybacks rose 44 percent in the third quarter from the previous quarter, but still remain far below record buyback activity in 2007, Standard & Poor's said Monday.
S&P said buybacks by companies listed on its S&P 500 index rose to $34.8 billion from the $24.2 billion spent during this year's second quarter, when financial turmoil sent buyback spending to the lowest level since S&P began recording such data in 1998.
The latest quarter's total spending on repurchases is down 61 percent from the $89.7 billion spent during the same quarter a year ago. Compared with the record $172 billion spent on buybacks during the third quarter of 2007, the latest quarter's total is down nearly 80 percent.
Buybacks remained relatively low in the latest quarter "as cash-conscious corporate strategists maintained a close watch, and grip, on expenditures," said Howard Silverblatt, an S&P senior index analyst.
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.
Over the past two months, S&P has seen an increase in stock buyback authorizations by companies' boards, which permit managers to make repurchases. But, rather than leading to actual buybacks, some of the authorizations are merely replacing expiring buyback programs, or replacing those that have reached their buyback limits, S&P said.
S&P expects buybacks to increase around 10 percent during this year's fourth quarter. For 2010, Silverblatt said he expects buybacks will remain "well below" their peak levels in 2007.
In this year's third quarter, financial sector companies in the S&P 500 spent 80 percent more on buybacks compared with the second quarter. But those companies' buyback spending remains 92 percent the level in 2007's third quarter.
Information technology company buybacks more than doubled in the latest quarter, rising nearly 122 percent, to account for about 30 percent of all buybacks.