Buybacks Off the Chart

Stock buybacks are huge.

Through the first nine months of this year, big U.S. corporations spent a record $325 billion snapping up some of their outstanding shares, according to Standard & Poor's. That's up 33% from the same time last year, and more than double the $130 billion spent on buybacks during the first nine months of 2004.

To put those figures in perspective, consider that total operating earnings for S&P 500 companies through the end of the third quarter was $590 billion. In other words, the biggest companies spent more than half their earnings power retiring their shares.

The wave of buybacks is a testament to how much cash companies have on their balance sheets, and to the ease with they can borrow money now with rates low. Companies are doing buybacks as away to juice earnings, by reducing the number of shares outstanding, and boost stock prices.

"The numbers are just phenomenal," says Howard Silverblatt, an S&P senior index analyst. "I've been doing buybacks for 19 years, and we've never had anything like this. And it is literally getting larger because companies are being encouraged by institutions and hedge funds to do buybacks."

The list of companies buying back stock includes some familiar and widely held names:

• Microsoft(MSFT)
• Pfizer(PFE)
• Coca-Cola(KO)
• American Express(AXP)
• Cisco(CSCO)
• Motorola(MOT)

Silverblatt says oil giant Exxon Mobil(XOM) has been one of the most prolific share repurchasers, buying up $8 billion in stock in the third quarter alone. Over the past 12 months, Exxon has spent about $26 billion buying its stock.