S&P 500 Stock Buybacks Increase in Q2 Following Two Quarters of Declines: S&P Dow Jones Indices

NEW YORK, Sept. 20, 2012 /PRNewswire/ -- S&P Dow Jones Indices announced today that preliminary results show that S&P 500 stock buybacks increased 32.6% to $111.7 billion during the second quarter of 2012, an increase from the $84.3 billion spent on buybacks during the first quarter of the year. The year-over-year gain was a mild 2.3% as the Index reversed the prior two quarters of reduced buybacks. 

"Company buyback activity increased significantly during the second quarter. The last time we have seen this level of activity was during the pre-recession heydays of 2005-2007," says Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. "While the second quarter produced a 3.3% broad decline in the equity markets, companies used the quarter to increase holdings, reduce share counts, and add a tail-wind to their eps during a quarter which set an operating record for profits."

Also of significance were M&A deals, which gave a boost to buybacks and reduced cash and equivalents for the second quarter in a row. Of note during the second quarter was Johnson & Johnson's $12.9 billion share repurchase as part of its Synthes deal and Express Scripts reducing its cash reserves by $8.2 billion as it combined with Medco.

On a sector basis, Silverblatt notes that S&P 500 Health Care issues dominated the quarter with $23.8 billion in buybacks, but excluding the Johnson & Johnson deal, would have ranked fourth behind Information Technology (which added $21.6 billion in buybacks), Consumer Discretionary ($17.3 billion), and Financials ($16.2 billion). 

Of note is AT&T, which returned to the buyback program during the first quarter with $2.1 billion in repurchases. The telecom giant added another $2.6 billion in buybacks during the second quarter, placing it as the fifth highest total for the quarter. American International Group, which purchased $2 billion in stock during the second quarter, recently completed a $5 billion repurchase. Johnson & Johnson's $12.9 billion in buybacks ranked as the highest expenditure in the quarter and was the second highest quarterly repurchase in history with the $15.7 billion spent by International Business Machines in the second quarter of 2007 still holding the record.

For the third quarter of 2012, Silverblatt sees additional improvement in S&P 500 buyback activity. "However, with average daily prices up 3% and quarter-to-date prices up over 7%, buyback dollars won't go as far as they did during the depressed second quarter.  S&P Dow Jones Indices is expecting to see higher EPS, due to an increase in buyback activity in at least 80 issues in their third quarter results. This will mean that investors again will need to look at the aggregate net income change, as well as earnings per share, when evaluating these issues." 

Historical S&P 500 buyback data can be found at: www.marketattributes.standardandpoors.com

About S&P Dow Jones Indices
S&P Dow Jones Indices LLC, a subsidiary of The McGraw-Hill Companies, Inc., is the world's largest, global resource for index-based concepts, data and research. Home to iconic financial market indicators, such as the S&P 500^â and the Dow Jones Industrial Average^SM, S&P Dow Jones Indices LLC has over 115 years of experience constructing innovative and transparent solutions that fulfill the needs of institutional and retail investors. More assets are invested in products based upon our indices than any other provider in the world. With over 830,000 indices covering a wide range of assets classes across the globe, S&P Dow Jones Indices LLC defines the way investors measure and trade the markets. To learn more about our company, please visit www.spdji.com.

Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"), a subsidiary of The McGraw-Hill Companies, Inc. Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones").  These trademarks have been licensed to S&P Dow Jones Indices LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices LLC, Dow Jones, S&P and their respective affiliates (collectively "S&P Dow Jones Indices") do not sponsor, endorse, sell, or promote any investment fund or other investment vehicle that is offered by third parties and that seeks to provide an investment return based on the performance of any index. This document does not constitute an offer of services in jurisdictions where S&P Dow Jones Indices does not have the necessary licenses. S&P Dow Jones Indices receives compensation in connection with licensing its indices to third parties.

SOURCE S&P Dow Jones Indices

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