Standard & Poor’s third quarter results show retreat of 48%. Despite the high levels of cash many companies are afraid of expenditures.
The preliminary results show S&P 500 stock buybacks posting $89.7 billion in stock repurchases during the third quarter of 2008, representing a 47.8% decline over the record setting $172.0 billion spent during the third quarter of 2007.
Compared to the third quarter 2007 Energy is the only sector to increase buybacks during the same period in 2008. Information Technology continued to account for a quarter of all buybacks, with Energy now accounting for 18%.
Since 2004 S&P 500 issues have spent approximately $1.73 trillion on stock buybacks compared to $1.87 trillion on Capital Expenditures and $907 billion on dividends.
Starting in the fourth quarter of last year, companies began to retreat from stock buybacks,” says Howard Silverblatt, senior index analyst, Standard & Poor’s. “Year-to-date, Standard & Poor’s data shows that stock buybacks are coming in at $156 billion less than this time last year.
Cash levels for the third quarter of 2008 were near an all-time high, so it’s not that companies can’t fulfill buyback programs,” continues Silverblatt. “They are instead choosing to hold onto the cash, unsure of what the near-term may bring. Given the current economic uncertainty, fewer employee options in the money, and the lack of alternative financing, Standard & Poor’s expects fourth quarter buybacks to drop from the current level, with the full year posting a 35% decline.
L.D.