Companies Continue With A Heightened Focus On Share Buybacks

Includes: SPY
by: David I. Templeton, CFA

S&P Dow Jones Indices' preliminary report on first-quarter 2014 share buybacks shows companies have not shied away from buying back shares in spite of record market highs. On a year-over-year basis buybacks increased 59% to $159.28 billion versus $99.97 billion in Q1 2013. Combining the buyback amount with the dividends paid, on a YOY basis the combination increased 41%.

The buyback leader in the first quarter is Apple (NASDAQ:AAPL), buying back $18 billion which set an S&P 500 Index record. Additionally, S&P Dow Jones Indices notes the technology sector dominated in buybacks by representing 30.9% of all buybacks in the quarter. Howard Silverblatt, Senior Index Analyst for S&P Dow Jones Indices noted in the S&P report:

The lower share count pushed up earnings per share significantly (defined as a 4% impact) for 99 issues in the S&P 500, with the Q1 poster child being Apple.

The key question for Q2 is did they do it to boost a poor Q1 earnings period that was impacted by weather conditions, or was it a shift towards more enhanced earnings via share count reduction, similar to what we experienced in 2006 and 2007?

From The Blog of HORAN Capital Advisors

Source: S&P Dow Jones Indices

Disclosure: Family long AAPL.