Aggregate share buybacks in the S&P 500 grew 32.0% year-over-year to $123.9 billion in Q3. While this represents a sequential decline of 0.1% from Q2, S&P 500 companies have been more active over the trailing year than in any period since the financial crisis. The trailing twelve-month sum of $448.1 billion is the highest since Q2 2008 ($526.9 billion).
The third quarter also marked the highest number of companies engaging in a buyback over a trailing twelve-month period (431, or 86%) since Q4 2008. Even though the number of dividend-payers in the S&P 500 index is at a 17 year high, this represented a higher number of companies than those paying a dividend (417).
The rise in both dividend payers and companies engaging in buybacks has contributed to a trend where very few companies do not engage in either form of shareholder distribution. In fact, just 16 companies in the S&P 500 (3.2%) did not pay a dividend or engage in a share buyback over the trailing twelve-month period. As recently as Q1 2010, more than three times as many companies (49, or 9.8%) did not make either form of distribution. Concurrently, the number of companies engaging in both forms of shareholder distribution reached the highest level since at least 2005 (369, or 73.8%).
The companies that do not engage in buybacks or dividends are typically smaller than those in the other groups. But there are exceptions, including amazon.com and Google. Amazon.com has cash and short-term investments amounting to nearly $8 billion, but its free cash flow (operating cash flow less fixed capital expenditures) was less than $0.4 billion over the trailing four quarters. Google, on the other hand, had free cash flow just shy of $12 billion over the trailing four quarters. The company also has cash and short-term investments of $57 billion, which grew 23.6% year-over-year.