Wide Impact on EPS Expected to Continue
NEW YORK, Nov. 27 /PRNewswire/ -- Standard & Poor's, the world's
leading index provider, announced today that S&P 500 stock buyback activity
continues to grow at a record pace, surging 35% from that of the third
quarter of 2005 and 140% from that of the third quarter of 2004. In US
dollar terms, stock buybacks in the S&P 500 were $110 billion during the
third quarter, slightly less than the record set during the second quarter
at $117 billion. It was the twelfth consecutive quarter of strong growth
(+20%) in buybacks for the index. For the 12-month period, total buybacks
are at a record $431 billion.
"The 2-year old buyback bonanza continues, with the buildup of treasury
shares adding to the corporate war chest for additional M&A activity," says
Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "The
unprecedented expenditure on buybacks and the resulting share count
reduction has had a material impact on earnings-per-share for over 20% of
the S&P 500 issues. S&P is concerned that investors may not fully
appreciate the full impact that share count reduction has on EPS,
especially considering the recent double-digit market gain for the S&P 500
since its August 11th low. Left unabated, continued share count reduction
can impact the supply of open market shares, and therefore the share price
itself."
According to Standard & Poor's, buyback activity within the S&P 500
began to substantially pick up during the fourth quarter of 2004, and has
continued to grow in both the size and number of participating companies.
Over the past eight quarters, S&P 500 issues have spent over $742 billion
on buybacks with over half of the issues posting fewer shares now then they
did two-years ago. "Buybacks and dividends have switched positions, with
buybacks now the favored form of return of shareholder value over that of
traditional dividend payments," adds Silverblatt.
Standard & Poor's data shows that on a sector basis, Information
Technology remains the constant, representing 25% of buybacks during the
third quarter. Energy however continues to increase its aggregate buyback
activity, and now accounts for 15% of overall buybacks, surpassing the
declining Financial sector that represents 12% of the buybacks.
"For the remainder of the year and into 2007, Standard & Poor's expects
the strong buyback activity within the S&P 500 to continue," concludes
Silverblatt. "The activity is fueled in part by the positive impact it is
having on earnings-per-share, and the desire of S&P 500 companies to
satisfy the demands of investors to utilize built-up cash reserves. Looking
further into 2007, we believe many of these shares will find their way back
into the public domain via increased M&A activity."
S&P 500 DIVIDENDS BUYBACKS 12-MONTH 12-MONTH
QUARTER $ BILLIONS $ BILLIONS DIVIDEND & DIVIDEND &
END BUYBACKS BUYBACKS
$ BILLIONS YIELD
09/30/2006 Preliminary 54.78 109.81 430.93 5.39%
06/30/2006 54.46 116.66 402.59 5.34%
03/31/2006 53.25 100.18 367.36 4.92%
12/31/2005 54.83 104.28 349.23 4.90%
09/30/2005 48.99 81.47 311.36 4.58%
06/30/2005 49.03 81.42 275.57 4.31%
03/31/2005 48.99 82.05 236.61 3.92%
12/31/2004 49.68 66.42 197.47 3.35%
09/30/2004 45.54 45.68 169.58 3.34%
06/30/2004 43.43 42.46 158.04 3.11%
03/31/2004 42.36 42.92 143.94 2.97%
12/31/2003 46.76 38.53 131.05 2.84%
09/30/2003 39.96 34.13 123.13 3.00%
06/30/2003 37.74 28.36 124.18 3.04%
03/31/2003 36.19 30.03 126.81 3.53%
12/31/2002 39.22 30.62 127.25 3.39%
09/30/2002 35.97 35.18 129.39 3.65%
06/30/2002 38.11 30.98 128.83 3.03%
03/31/2002 34.51 30.47 131.47 2.61%
12/31/2001 36.27 32.75 132.21 2.62%
09/30/2001 37.53 34.63 133.15 2.91%
About Standard & Poor's Index Services
Standard & Poor's Index Services, the world's leading index provider,
maintains a wide variety of investable and benchmark indices to meet an
array of investor needs. Its family of indices includes the S&P 500, an
index with $1.26 trillion invested and $4.45 trillion benchmarked, and the
S&P Global 1200, a composite index comprised of seven regional and country
headline indices. For more information, please visit
http://www.standardandpoors.com/indices.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP),
is the world's foremost provider of financial market intelligence,
including independent credit ratings, indices, risk evaluation, investment
research and data. With approximately 7,500 employees, including wholly
owned affiliates, located in 21 countries, Standard & Poor's is an
essential part of the world's financial infrastructure and has played a
leading role for more than 140 years in providing investors with the
independent benchmarks they need to feel more confident about their
investment and financial decisions. For more information, visit
http://www.standardandpoors.com.
SOURCE Standard & Poor's
back to top
