Stock buybacks are falling to a three-year low just as U.S. chief executive officers boost spending on plants and equipment to a record.
Companies announced $1.1 billion of repurchases a day on average during the earnings season in April and May, the lowest level since mid-2009, according to data compiled by Bloomberg and TrimTabs Investment Research Inc. Capital spending in the U.S. has risen since 2010 and reached $63.6 billion in March. Devon Energy Corp. eliminated buybacks and boosted exploration and production spending 18 percent. United Parcel Service Inc. cut repurchases in order to buy TNT Express NV.
Announced buybacks slipped to $21.7 billion in April and $6.1 billion this month, on pace for the lowest level since September 2009, according to Sausalito, California-based TrimTabs. During the earnings season a year earlier, buybacks averaged $2.6 billion a day, the data show.
S&P 500 companies outside the financial and utilities industries increased cash holdings to a record $1.03 trillion at the end of 2011 after 13 straight quarters of beating analysts’ earnings estimates, according to S&P. Capital expenditures rose 38 percent from June 2010 through the end of the first quarter, the fastest rate since June 2006, when stocks were in the middle of a five-year bull market, data compiled by Bloomberg show.
“How long is it going to look like that?” Brady, who helps oversee about $76 billion at Thornburg, said in a May 24 phone interview. “If the prospects for businesses generally are less good, slower economic growth, slower global growth, then investing in those businesses is far less helpful.”