The rich get richer as stock buybacks surge

Trader on the floor of the New York Stock Exchange.
Getty Images

As the stock market sets a series of historic highs, investors can thank companies for buying back their own shares at a near-record pace.

Repurchases and buybacks soared nearly 60 percent in the first quarter, putting a floor under a market that struggled amid a brutal winter and an economy that contracted at least 1 percent. Companies have used bargain-basement interest rates to borrow money for stock purchases, which have fed the equity market even as gross domestic product growth has stumbled along.

In all, corporations increased buybacks by 59 percent to $159.3 billion, according to S&P Dow Jones Indices. That's up strongly from the $100 billion for the same period in 2013 and a bit below the $172 billion high set in the third quarter of 2007, just before the financial crisis and market crash that sent indexes plunging 60 percent. The stock market index gained just 2.2 percent in the first quarter, but it likely would have been substantially worse without the buybacks.

"Companies bought more shares, reducing their share count, and got a tailwind in the first quarter," said Howard Silverblatt, senior index analyst at S&P. "The big question is, was it a one-shot deal to help through the poor weather of Q1, or was it the start of something new?"