Capital Markets

Buyback Beat Goes on at 3M, Polo, Safeco

In the first quarter, buyback activity among S&P 500 companies surged 22.1 percent over that of the first quarter of 2005, according to S&P.
Stephen TaubAugust 15, 2006

Spotlighting a broader share-buyback trend in Corporate America, the board of directors of 3M Company has authorized the repurchase of $1 billion of its stock after announcing that it would complete its existing $2 billion share repurchase authorization ahead of schedule.

That means that the maker of the Scotch tape and Post-it brands will have been authorized to buy back a total of $3 billion worth of stock between Feb. 13, 2006, and Feb. 28, 2007. The shares will be used to support the company’s stock-based employee compensation plans and for other corporate purposes, according to 3M.

The buybacks continue a longer term trend at the diversified technology company. By the end of this year, the company will have repurchased about $8.5 billion of its own stock and paid more than $5 billion in cash dividends over the prior five-year period.

But 3M is only one of a number of companies that announced sizable buybacks this week. For example, CA will begin the process of repurchasing $1 billion in stock, the first phase of a planned $2 billion stock repurchase program. The company, formerly known as Computer Associates, will buy the stock through a combination of cash on hand and bank financing.

This week’s buybacks haven’t been restricted to the largest companies, however. The board of Gentex Corp., a maker of auto products approved the repurchase of up to an additional eight million shares under its existing share repurchase plan. The share repurchase plan is now authorized to repurchase up to 24 million shares.

As of the end of the second quarter of 2006, including the prior share repurchases in 2003, 2005, and 2006, the company had repurchased about 12.3 million shares, leaving more than 11.6 million shares authorized to be repurchased under the plan.

Further, Polo Ralph Lauren’s board okayed a $250 million stock repurchase program, and Safeco announced that it would it buy up to $250 million worth of its outstanding shares of common stock.

The recent activity reflects a lengthier surge in buybacks. In the first quarter, share-repurchase activity among S&P 500 companies surged 22.1 percent over that of the first quarter of 2005, according to Standard & Poor’s. Over the trailing 12 months, the increase was around 55.2 percent.

The S&P 500 spent $100.2 billion on stock buybacks during the first quarter, second all-time to the $104.3 billion set during the fourth quarter of 2005, according to the rating service which does not expect to release its second-quarter data for another two weeks.