Stock buybacks of S&P 500 firms more than double in third quarter

BOSTON - Companies are using extra cash built up during the recession to repurchase stock, which is likely to please investors who see the value of their shares rise.

But the buyback surge may not please President Obama, who urged companies to use surplus cash to hire more workers, hoping to generate jobs to sustain the economic recovery.

Standard & Poor's reported Monday that stock repurchases by S&P 500 companies more than doubled to $79.6 billion in the July-to-September period from $34.9 billion in last year's third quarter.

It was the fifth consecutive quarter of increasing buyback activity among the 500 largest publicly traded companies, many of which have substantial cash holdings built up during and after the recession that officially ended in mid-2009.

Philadelphia companies also are buying back shares. Since July 1, buybacks valued at more than $940 million have been announced by companies based in the region. They include S&P members AmerisourceBergen, a pharmaceuticals distributor; and financial services giant Lincoln National Corp. - but also smaller companies, such as Polonia Bancorp, which posted net income last year of just $330,000.

Stock buybacks indicate companies have enough cash to take their shares off the market, which increases the value of investors' remaining shares and boosts per-share earnings results.

Buyback growth in the latest quarter "marks the full return of corporate participation in the equity markets," S&P analyst Howard Silverblatt said. "While we do not expect a return to the 2005-2007 buyback bonanza, we do see this as a strong, positive sign for the overall health of the market."

When companies build up cash from rising profits, their options include hiring more workers, investing in capital spending or acquisitions, buying back stock, and raising dividends paid to shareholders. Many companies have been opting for the latter two, which please shareholders.