"I could foresee a situation where we're going to continue to buy back more shares over the next year or so. It could put the credit rating at risk. And I would tell you that that's okay," said United Technologies chief executive Greg Hayes, speaking at a Morgan Stanley investor conference on Thursday. "It makes pretty good sense to buy back stock when I'm paying more in dividends than I'm paying in interest to buy it back."
While there is no way to quantify exactly how much share buyback have helped stock performance, approximately 20 percent of the companies in the S&P 500 have "significantly" decreased share counts year over year for the past 6 quarters, Silverblatt said.
As a result of cutting the number of shares available, these companies have bolstered such metrics such as earnings per-share, helping to make companies look like they are doing better even if their absolute performance remained the same, he said.
The companies that have been buying back stock the most aggressively have not outperformed this year, however. The S&P 500 Buyback Index, which tracks the performance of the 100 stocks with the highest buyback ratios in the S&P 500—a group that includes Coca-Cola Enterprises, Cameron International, and Motorola Solutions—is down 6.8 percent for the year to date, a performance about 1 percentage point worse than the benchmark as a whole, according to Thomson Reuters data.
Through August, companies in the S&P 500 had authorized $598.5 billion in share buybacks, the largest on record and more than the full-year totals from 2008 to 2012, according to Robert Leiphard, an analyst at Birinyi Associates. Companies are on pace to announce $897 billion in buybacks for the full year, which would top the $863 billion authorized in 2007 as the largest of all time, he said.
Amount of debt
Some analysts and fund managers now expect those numbers to increase by the end of December.