The final quarter of 2013 had cash-laden S&P 500 companies spending $214.4 billion on share buybacks and cash dividends, according to preliminary results released Wednesday by S&P Dow Jones Indices.
The figure, second only to the $233.2 billion spent in the third quarter of 2007, comes in "reaction to activists and potential activists." said Howard Silverblatt, senior index analyst at the S&P Dow Jones Indices.
"If you have people knocking on the boardroom door, you have to answer it or reinforce the door," said Silverblatt, who expects the trend to continue through the first quarter, with Apple likely to set a record for buybacks or at least lead the pack for the three-month period.
And, when the Federal Reserve on Wednesday afternoon follows up on its annual stress tests of the nation's 30 largest lenders, regulators are expected to signal whether institutions including Citigroup and Bank of America can go ahead with proposed dividends and share buybacks.
The first round of the Fed's yearly check found 29 of the 30 largest U.S. lenders could withstand a deep recession. "Today comes the second one, with hypothetical dividend and buyback levels, so if a company passes that, they can pay that hypothetical, and a lot of people expect big payments from Bank of America and Citi," both of which currently pay dividends of a penny per quarter, said Silverblatt.
Using cash to repurchase shares and to increase payouts to shareholders is a short-term winning strategy for companies in that the moves help support stock prices and help boost quarterly earnings per share. "It's instant gratification; longer term is a different question," said Silverblatt.
As he put it: "capital expenditures are setting a record for 2013, but where they are spending is not on new plants or a second shift, things that would add jobs."
Stock buybacks, or share repurchases, rose 1 percent to $129.4 billion in the fourth quarter of 2013, up from the $128.2 billion spent the prior quarter, according to S&P Dow Jones Indices. For fiscal 2013, S&P 500 companies increased their buyback expenditures by 19.2 percent to $475.6 billion from $398.9 billion in 2012.
"The 19.2 percent increase in buyback expenditures for 2013 only matched the 19.2 percent average daily stock price increase. They just kept up with the market price," said Silverblatt.
—By CNBC's Kate Gibson.