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Buyback Plans Signal Drop in U.S. Repurchases: Chart of the Day

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Monsanto Co.’s announcement yesterday of a $10 billion stock-buyback program, its largest ever, belies a growing reluctance among U.S. companies to start or step up repurchases.

The CHART OF THE DAY illustrates the trend by showing the quarterly dollar amounts of all announced buybacks, as compiled by TrimTabs Investment Research Inc. and presented in a report three days ago. The chart also displays the total spending on repurchases by companies in the Standard & Poor’s 500 Index, provided by S&P Dow Jones Indices.

Buyback authorizations are poised to fall for the third time in four quarters after peaking at $196 billion in last year’s second quarter. The proposed repurchase by St. Louis-based Monsanto brought the April-June total to $103 billion.

“It’s very surprising that this is happening,” David Santschi, chief executive officer of TrimTabs, said yesterday in an interview. “As prices go up, companies need to buy back more shares to offset dilution” from employee stock options, the Sausalito, California-based analyst said.

The decline contrasts with an increase in S&P 500 companies’ spending on their own shares, as the chart shows. Last quarter’s outlays of $159 billion were the most since the third quarter of 2007, near the end of a bull market in stocks.

Announcements are a leading indicator for repurchases, Santschi said, and the current slump suggests there will be fewer buybacks by the fourth quarter.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editors responsible for this story: Chris Nagi at chrisnagi@bloomberg.net Jeff Sutherland, Lynn Thomasson

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