Share buybacks continue to be one of the hottest forces in all of investing. Consider that for the 12 months that ended in October of last year, the companies in the Standard & Poor's 500 issued $277 billion in dividends. Over that same time frame, those companies spent $375 billion in share buybacks. Buybacks have become the preferred way for corporations to return money to their shareholders.
More than 8 billion shares were retired via buybacks from the S&P 500 companies in the 18 months that ended in October 2012. That leaves about 300 billion shares outstanding for those 500 companies, which is the lowest that figure has been since 2009.
This might seem like good news for investors, but there's an important caveat. One would expect companies to buy back their shares when stock prices are still rising, but their record of doing so is not impressive. The peak for buybacks by the S&P 500 was in 2007, just before the market collapsed; the low point came in early 2009, just as stocks were going on a four-year bull run.
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