U.S. companies spent record $1 trillion buying back own stock this year

By Irina Ivanova

/ MoneyWatch

10 years after financial crisis, is US prepared?

U.S. companies have spent $1 trillion this year on buying back their own stock—a record figure reached three weeks before year's end. That's according to TrimTabs, an investment research firm.

One trillion dollars, a round number of epic proportions, is roughly equal to the amount U.S. consumers are expected to spend this holiday shopping season. It's also larger than the gross domestic product of 166 countries.

Just in the past week, pharmaceutical giants Pfizer and AbbVie announced a combined $15 billion in stock buybacks. Pioneer Natural Resources, an oil extraction company, announced a $2 billion buyback, and animal medicine maker Zoetis announced another $2 billion.

"Stock buybacks have been going on throughout this bull market, and companies are using it partly as a way to prop up their prices," said Edward Yardeni, chief investment strategist at Yardeni Research. "Especially in this environment, they would like to do what they can to keep their prices from going down."

Buybacks boost a company's stock price by reducing the total number of shares it has in the market. With the three major U.S. stock indexes down on the year as of Monday, it's not clear buybacks have been much help. And the jury is out on how benficial to shareholders stock buybacks are long-term, with one 2016 analysis finding that companies that don't repurchase their own stock tend to perform better in the long term than those that do.

One implication of high buybacks is that companies don't have other high-return projects in which to put money, Cowan Asset Management wrote recently. "This means that, collectively, companies aren't investing in things like buildings and machinery – things that increase the overall economy's productivity."

For that reason, buybacks have drawn criticism not only from progressive economists but from such unlikely sources as Sen. Marco Rubio. The Florida Republican recently said on Twitter that companies who buy their stock are "deciding that returning capital to shareholders is better for business than investing in their products or workers. Tax code encourages this. No surprise we have work life that is unstable & low paying."

When corporation uses profits for stock buy back it’s deciding that returning capital to shareholders is better for business than investing in their products or workers. Tax code encourages this. No surprise we have work life that is unstable & low paying. https://t.co/yHV1qS0yLu

— Marco Rubio (@marcorubio) December 13, 2018

The GOP-championed tax cuts that Rubio voted for last year have encouraged buybacks by making even more cash available to companies at at time when they are sitting on historically large cash reserves, without guidance from lawmakers on how to spend that money — say, requirements to hire workers or boost pay in return for their tax windfalls, which the tax law did not include.

Shareholders often like buybacks, since they increase the value of the stock they already hold. But companies have historically had questionable judgment when it comes to timing their purchases, buying more of their shares precisely when they're highly priced.

Prior to this year, buybacks hit a high in the third quarter of 2007. One year later, the S&P 500 had lost one-third of its value.

First published on December 17, 2018

© 2018 CBS Interactive Inc.. All Rights Reserved.

Former co-stars defend Michael Weatherly amid harassment accusation

Pauley Perrette and Sasha Alexander both posted supportive messages for Weatherly on Twitter

updated 2M ago

Share buybacks hit record $1 trillion in 2018

U.S. companies collectively spent more on buying back their own stock this year than 166 countries produce in GDP

updated 9M ago

Michael Flynn business associates charged with illegally lobbying for Turkey

The indictment of two former associates of Michael Flynn were part of a federal investigation into illegal Turkish lobbying.

updated 21M ago

Johnson & Johnson: Our Baby Powder is safe

Company takes out ads blasting as misleading a news report alleging it hid knowledge of asbestos in talc for decades

updated 26M ago

Pilot recounts jet crash, water rescue by parasailer

A pilot whose fighter jet crashed into the Pacific Ocean off the Hawaii coast last week is recounting the ordeal

updated 37M ago

Michael Flynn business associates charged with illegally lobbying for Turkey

The indictment of two former associates of Michael Flynn were part of a federal investigation into illegal Turkish lobbying.

updated 21M ago

Is Joe Biden Democrats' best bet?

Early polling in Iowa doesn't always mean winning the caucuses, or making it all the way to the White House

1H ago

Comey to testify again before House Judiciary Committee

The former FBI director, fired by President Trump in 2017, makes his second appearance this month to a closed-door session on Capitol Hill

2H ago

New reports detail sophistication of Russian influence efforts in U.S.

Two new analyses this week portray a sprawling, multifaceted operation affecting millions of users in the U.S. and persisting long after the 2016 presidential election

1H ago

Trump vows to review case against Army "hero" charged with murder

President's vow raises questions about the possibility he could jeopardize the ongoing military legal proceedings

5H ago

3rd round of U.S.-Taliban talks start without Afghan government reps.

Change of venue for ongoing efforts to negotiate a roadmap for peace in Afghanistan, without any Afghan government negotiators

2H ago

Yemen's rebels pin hopes for peace on the U.S. government

With ceasefire about to take effect, Houthi foreign minister tells CBS News relief for millions is coming, and with U.S. help, peace can flourish

updated 59M ago

Unearthed tomb called the most "significant discovery in decades"

The walls are covered in carvings depicting some of their favorite activities: hunting, musical performances and even sailing

3H ago

Help will come too late for many starving Yemeni kids

As ceasefire brings some hope, parents in rebel territory feed their kids — the ones strong enough to eat anything — boiled leaves

2H ago

Malaysia accuses Goldman Sachs of involvement in 1MDB scandal

Investment bank faces criminal charges over alleged multibillion-dollar theft from sovereign wealth fund

5H ago

Former co-stars defend Michael Weatherly amid harassment accusation

Pauley Perrette and Sasha Alexander both posted supportive messages for Weatherly on Twitter

updated 2M ago

Cardi B defends Offset after fans bash him

It seems that Offset's stunt on Saturday might have been pre-approved by Cardi B's team

1H ago

The "Hamilton" team on crafting a revolutionary musical

Director Thomas Kail, choreographer Andy Blankenbuehler, writer-lyricist-actor Lin-Manuel Miranda and music director Alex Lacamoire talk about their historic collaboration

2H ago

Miss Universe 2018: Catriona Gray of the Philippines wins crown

The 24-year-old Gray edged out first runner-up Tamaryn Green of South Africa and third-place Sthefany Gutierrez of Venezuela

13H ago

Emily Blunt on "Mary Poppins Returns"

The Golden Globe-nominated star of the new Disney musical talks about taking on the role of P.L. Travers' "practically perfect" nanny made famous by Julie Andrews

Dec 16

New reports detail sophistication of Russian influence efforts in U.S.

Two new analyses this week portray a sprawling, multifaceted operation affecting millions of users in the U.S. and persisting long after the 2016 presidential election

1H ago

Google to spend $1B on major New York City expansion

The 1.7 million square-foot campus will help the tech giant double its New York City staff within a decade

5H ago

First of new fleet of GPS satellites set for launch

New generation is designed to be more secure and accurate but many new features won't be available until 2022 or later

6H ago

Colin Kroll, HQ Trivia and Vine co-founder, dies at 34

Colin Kroll, the CEO and co-founder of the popular HQ Trivia app, has died, the company said Sunday

20H ago

Almanac: The first vending machine

On December 16, 1884, William Henry Fruen patented his "Automatic Liquid-Drawing Device," leading the way to coin-operated devices dispensing a myriad of products

Dec 16

Johnson & Johnson: Our Baby Powder is safe

Company takes out ads blasting as misleading a news report alleging it hid knowledge of asbestos in talc for decades

updated 26M ago

Health care stock sink after ACA ruling

After a Texas judge ruled the health care law unconstitutional, insurers and hospital operators led stock markets lower

3H ago

"That overdose saved my life": Why opioid deaths plunged in one Ohio county

In the midst of what's considered the nation's worst public health crisis so far in the 21st century, Hamilton County is dramatically reducing the number of deaths

3H ago

How to combat loneliness during the holidays

Experts say loneliness – which is not the same as being alone – is at epidemic levels nationwide, and a greater public health concern than obesity and smoking combined

3H ago

Vaping booming in U.S. high schools, survey finds

Doubled use of e-cigarettes this year was biggest one-year rise in survey's 44-year history, far beyond a mid-1970s surge in pot smoking

6H ago

Share buybacks hit record $1 trillion in 2018

U.S. companies collectively spent more on buying back their own stock this year than 166 countries produce in GDP

updated 9M ago

Johnson & Johnson: Our Baby Powder is safe

Company takes out ads blasting as misleading a news report alleging it hid knowledge of asbestos in talc for decades

updated 26M ago

These banks offer savers rates higher than 2%

While traditional banks tend to pay less than 1% on savings accounts and CDs, these places are offering more than 2%

2H ago

Health care stock sink after ACA ruling

After a Texas judge ruled the health care law unconstitutional, insurers and hospital operators led stock markets lower

3H ago

Prosecco, now the No. 1 bubbly, aims to keep the party going

The Italian sparkling wine's makers have France's Champagne on its heels, and they plan to build on those gains

4H ago

Mother in viral video where NYPD take toddler speaks out

"I was so afraid. I was combative with my thoughts … I just remember being talked to very viciously," Jazmine Headley said Sunday

14H ago

Patient hijacks ambulance in Southern California

Incident started in Lake Elsinore and headed north on Interstate 15 until it finally came to an end in Hesperia

14H ago

French city mourns as 5th victim dies after Christmas market attack

More than 1,000 people reportedly attended the memorial Sunday, days after fatal shooting in Strasbourg

12H ago

Ex-officers charged after video showed them slamming teen

Both officers resigned in November after video from Brusly Middle School showed the officers slamming the student

16H ago

FindJodi: The decades-long search for a missing TV news anchor

More than two decades after an Iowa TV anchor disappeared, "48 Hours" reports on new information and new efforts to find Jodi Huisentruit

Dec 16  Original Article