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Originally published Monday, December 20, 2010 at 6:29 PM

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Companies more than double buybacks

Companies are using extra cash built up during the recession to repurchase stock, moves that are likely to please investors who see the...

The Associated Press

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

But the buyback surge may not please President Obama, who is urging companies to instead 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 them with substantial cash holdings built up during and after the recession that officially ended in mid-2009.

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."

Much of the recent buyback surge has been driven by technology companies, which fared better than most corporations through the recession because they entered it with relatively little debt and have seen demand for their products hold up.

In the latest quarter, information-technology companies, including Redmond-based Microsoft, Hewlett-Packard and IBM, made up nearly 29 percent of all buybacks, up from 27 percent in the second quarter.

Wal-Mart Stores and Exxon Mobil were among the other names making large buybacks in the latest quarter.

Health-care companies repurchased less stock. Silverblatt expects a slight overall increase in buybacks in the fourth quarter.

Dividend payouts by U.S. corporations also are expected to rise this year.

Third-quarter dividend payouts totaled $51.3 billion for S&P 500 companies, and are nearly back to their first-quarter 2009 level of $51.7 billion.

But Silverblatt said that payouts likely won't return to 2008 levels until 2013.

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