IBM, based in Armonk, New York, bought back about $35 billion since the end of 2010, data compiled by Bloomberg show. The world’s largest provider of computing services has said it plans to repurchase $50 billion from 2011 to 2015. While revenue has fallen the last six quarters, buybacks have helped per-share earnings expand.
Disney, the world’s largest entertainment company, plans to purchase between $6 billion and $8 billion in shares this fiscal year, which ends Sept. 30, Chief Financial Officer Jay Rasulo said during a Sept. 12 conference call. The Burbank, California- based company has bought back about $3 billion in calendar 2013, Birinyi data show. Disney, which has about $4 billion in cash and short-term investments and an A credit rating, has seen shares climb 40% this year.
Pfizer Inc. gained 73% the last three years. The New York-based company said it plans to buy back $39 billion of stock, including a June announcement for $10 billion. The world’s biggest drugmaker acquired more than $11 billion so far this year, according to Birinyi data. Pfizer sold $4 billion of bonds in May, its first dollar-denominated offering in more than four years.
The $1.137 trillion of investment-grade corporate bonds issued this year is a record, topping last year, according to data compiled by Bloomberg. While the average yield of 3.11% is up from the record low 2.65% in May, it’s still almost 1.8 percentage points below the decade mean, Bank of America Merrill Lynch index data show.
“A lot of companies are using their cash flow to buy back shares and quite a few companies are borrowing money to buy back shares,” Edward Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York said in a Dec. 11 phone interview. “That will probably continue at the pace we’re seeing now.”
The Fed has kept its benchmark lending rate near zero since December 2008 and implemented three rounds of economic stimulus programs. The central bank will reduce its $85 billion monthly bond purchases at the Dec. 17-18 meeting, according to 34% of economists surveyed by Bloomberg Dec. 6. Nine of the 35 economists surveyed said the central bank will buy fewer bonds at its January meeting, and the remaining 14 predict tapering will start in March.
While share buybacks have boosted earnings, they’re also a sign that the economy isn’t strong enough to support corporate investments, according to Bruce McCain, who helps oversee more than $25 billion as chief investment strategist at the private- banking unit of KeyCorp in Cleveland.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.