The stock buyback binge

Since 2009, buybacks have been responsible for 21 percent of the overall increase in market value for S&P 500 firms

Companies are buying back parts of their own shares.
(Image credit: Ryan Etter/Ikon Images/Corbis)

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A rising stock price used to mean a company was doing something right, said Alain Sherter at CBS News: releasing great products, conducting trailblazing research, even benefiting from visionary leadership. Today, though, the company might just be "buying a boatload of its own shares." Stock buybacks, which help juice a company's short-term stock price by reducing the number of outstanding shares, are nearing historic levels. U.S. companies spent $516.7 billion buying their own shares in the first nine months of this year, the highest amount since the record first three-quarters of 2007. Firms love buybacks because they can effectively boost earnings per share, since there are fewer shares in circulation, even if a company's total earnings fall or stay flat. In fact, since 2009, buybacks have been responsible for 21 percent of the overall increase in market value for S&P 500 firms.

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