Buybacks Increase

Stock buybacks for the first six months of 2014 have reached $338.3 billion, the largest amount in the first six months of a year since 2007. The top repurchasers so far this year are Apple ($32.9 billion), IBM ($19.5 billion), and ExxonMobil, Pfizer, and Cisco, each with more than $9 billion in repurchases. Even more amazing is that companies spent 31 percent of the cash flow generated in the second quarter on buybacks. We feel the textbook makes a compelling case that share repurchases are a more tax efficient method of paying dividends. However, critics argue that share repurchases are used to artificially boost stock prices and that management isn't investing as much as it could in the business, which will hurt long-term growth.