Companies in the S&P 500 bought back $104 billion of their own stock in the fourth quarter of 2005, up 57% from the fourth quarter of 2004, according to a report from Standard & Poor's. For the full year, companies repurchased $349 billion, up 77% from the $197 billion repurchased in 2004.
The most active buyers in the fourth quarter included ExxonMobil Corp., General Electric Co. and Microsoft Corp., which accounted for a combined $18.7 billion, or 18% of the total amount of buybacks.
S&P analysts expect the level of buybacks to remain strong through this year, driven by exercised employee stock options, the positive impact on earnings per share of buybacks and the pressure from investors to use record cash reserves.
"Companies have the ability to do it - they've got the cash, the willingness and investors are pushing them," said Howard Silverblatt, senior index analyst at S&P. "And they're not just buying back stock, but they're reducing the number of shares outstanding," which boosts earnings per share. He said shares repurchased and moved to corporate treasuries are likely to be used for mergers and acquisitions activity.
