Standard & Poor is attributing a record number stock buybacks in the first quarter of 2005 to both an increase in exercised employee stock options and a desire by many firms to reduce their share counts. The New York investment research firm says that S&P 500 company buybacks leaped by 91% for the first quarter of 2005 compared with the same period a year ago, and grew by 64% for the 12 months ending March 2005. Stock buybacks reached $82 billion in the first three months of 2005 compared with $43 billion in the first quarter of 2004. Stock buybacks in the S&P 500 were $66 billion.
Standard & Poor's expects buyback activity to continue throughout 2005. Given the number of options already outstanding that must be satisfied, the desire to assist earnings per share via share reduction, the enormous cash reserves, and the growing attention by investors to value returned, 2005 buybacks are expected to significantly outpace 2004 and easily outpace actual 2005 dividend payments," says Howard Silverblatt, Standard & Poor's s equity market analyst.