Johnson & Johnson and ConocoPhillips today announced plans to repurchase a combined $25 billion of stock, adding to this year's record pace of U.S. share buybacks.
J&J, the world's largest maker of health-care products, will use a combination of cash and debt to fund a $10 billion repurchase program, the company's largest. ConocoPhillips, the third-biggest U.S. oil producer, plans to buy back as much as $15 billion of its shares through 2008.
Today's buyback announcements follow record repurchase programs initiated this year by Home Depot Inc., the largest home-improvement retailer, and International Business Machines Corp., the biggest computer-services provider. U.S. companies announced $415 billion of share buybacks in 2007, 24 percent ahead of last year's record pace, according to data as of June 29 compiled by Birinyi Associates Inc.
``Corporations are flush with cash to the extent they feel they can grow their businesses and still have money left over to return to shareholders,'' said James Awad, who oversees about $1.3 billion as chairman of Awad Asset Management in New York. ``One of the legs of this bull market has been that the supply of common stocks has been shrinking.''
Earlier today, I commented on the large amount of cash that companies have on hand. This is where all of the money for these buybacks is coming from. These buybacks have provided a certain amount of support for stocks, as well as providing fuel for the large amount of M&A that has happened for this expansion. So long as companies have large amounts of cash on hand, expect to hear more announcements like this.