Despite the fact that earnings have not improved in Q1, companies are still flooded with cash. They use that money to buy back their own stock. Large corporations approved 141 billion dollars in buybacks in the month of April: a record. It was the largest amount announced in a single month, namely, according to money management and research firm, Biriny Associates.
In 2014 large companies spent 679.5 billion dollars on buybacks already and, if the trend continues, this amount will be exceed this year by S&P 500 companies. They are well on their way to do so, until now.
Buyback Programs 2015
Almost 400 billion dollars in share buyback programs have already been announced in 2015, which makes it the strongest start to a year ever, according to Birinyi Associates. Robert Leiphard is an analyst at Birinyi Associates. He mentioned that buyback programs are still the preferred way of spending cash.
On an individual level, buying back shares is a very useful way to put cash to work for a company. In general, however, it seems that this is becoming a massive movement at the cost of new personnel or investments and capital expenditures, according to Leiphard.
Buyback programs also do not have the best effect in the short-term on investor sentiment. Below you can find an overview of announced buyback programs ad their size of companies in the S&P 500 since 2000.
