Buybacks Continue to Climb

U.S. companies authorized $41 billion in stock buybacks last month, continuing a trend of using flush balance sheets to fund repurchase programs.

According to a report by Birinyi Associates, September brought the total amount of buyback authorizations up to $407 billion year-to-date. That represents a 48 percent increase over the authorizations made by that point last year.

Rob Leiphart, an analyst at Birinyi, said the buybacks were in response to the declining market.

"There have been a number of companies that have issued buyback programs specifically stating that they are authorizing the program because they believe their shares are undervalued," Leiphart said.

There were 94 new buyback announcements in September, including the first ever repurchase plan authorized by Berkshire Hathaway. The financial services sector has had the largest number of buyback authorizations this year.

September’s numbers put 2011 on track to having the third most authorizations of all time, trailing only 2006 and 2007.

Buyouts fell off in 2008 during the financial crisis and fell even further in 2009. While they recovered somewhat last year, 2011 has already surpassed the total amount in authorized buybacks for 2010.

Leiphart said that as companies recovered over 2010, they still did not hire workers, instead shoring up the cash on their balance sheets.

"That was coupled with the extreme volatility and the quick move down that we saw in the market," Leiphert said. "These companies are flush with cash and being run extremely efficiently, and they need something to do with that cash."