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Inside the Market

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Stock buybacks are surging Add to ...

Stock buybacks were certainly popular among U.S. companies in the third quarter. According to Standard & Poor's, companies bought a total of $79.6-billion (U.S.) worth of their own shares, up from $34.9-billion last year - marking a year-over-year increase of 128 per cent, and a 2.5 per cent increase over the second quarter total.

"The 128 per cent increase in share repurchases marks the full return of corporate participation in the equity markets," said Howard Silverblatt, senior index analyst at S&P Indices, in a note. "While we do not expect a return to the 2005-2007 buyback bonanza, we do see this as a strong, positive sign for the overall health of the market."

The information technology sector, which has long been identified among observers for its big cash holdings, dominates the action, accounting for 28.6 per cent of all buybacks. Indeed, three of the top four buyback deals were done by tech firms: Microsoft Corp. , Hewlett-Packard Co. and International Business Machines Corp. bought a combined $12.1-billion worth of their own shares.

Mr. Silverblatt combines buybacks with dividends, to determine a company's overall yield - a way of determining how much cash companies are delivering to shareholders. Today, the combined yield is 4.45 per cent, its highest level since June, 2009 when the combined yield was 5.17 per cent.

However, it is still well below levels seen during more prosperous and stable times earlier this decade, when it moved between 6.5 per cent and 7.5 per cent.

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