Stock Buybacks Retreat in Q1 But Remain Strong

Posted by: Howard Silverblatt on June 18, 2008

Q1 2007 S&P 500 buybacks at $113.9B vs. $117.7B Q1 2007; First Q-over-Q decline (-3.23%) since Q3 2003

Pullback by Financials that started just prior to the credit crunch continues; Q1,’08 12.35% of buybacks, Q1 2007 28.68%

10th straight quarter of $100B+ buybacks; highest Q dividend was Q4 2007 at $67.1B

Financial share count increasing as issues shore up cash accounts; dilutions from shares and future dilution from convertible instruments

XOM still the poster child for buybacks and SCR (Share Count Reduction)

Expect $100B to continue throughout 2008, but not at the record setting numbers; given the decline in Financial buying, the buybacks are strong

Non-Financial issues are still loaded with cash, Q1 was an 8.8% gain, with 7%+ cash-flow, Q2 EPS expected to increase 10%
Underlying demand for buybacks fed by employee option expiration that date back to the end of the bear market, holders still react positively; companies love them because they still own the asset and they increase EPS in the same quarter they are purchased

Buybacks are temporary unless companies retire the share
Financials have actually reversed their buybacks (12.35% of the action this quarter vs. 28.68% in Q1 2007) and increased their share count in order obtain capital
Dividends however are a check in the main that I will cash and more importantly that I will expect to get next quarter
Bottom line – I want to be a believer in buybacks, but dividends pay the $4 gas pump

June 16 quarterly update releasehttp://www2.standardandpoors.com/spf/pdf/index/061808_SP500_BUYBACK_PR.pdf?vregion=us&vlang=en

April 16 full report
http://www2.standardandpoors.com/spf/pdf/index/040708_SP500_BUYBACK_PR.pdf

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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