They’re back! Corporate stock buybacks, that is.

A day after Cisco Systems (CSCO) said it is adding $10 billion to its current buyback plan, Blackberry maker Research In Motion (RIMM) said Thursday it will repurchase up to $1.2 billion of its shares over the next year. This after not buying any of its own stock over the past year.

The tech giants join blue-chip companies including IBM (IBM), Travelers (TRV) and Visa (V), which have recently announced plans to buy back big chunks of their own shares.

The spate of big buyback announcements is in stark contrast to earlier this year when companies were hoarding cash in the face of plunging sales and a limited ability to raise money through capital markets.

“Through March, cash was king. Companies felt if they didn’t have it, they wouldn’t be able to get access to it,” says Rich Moroney, chief investment officer for Horizon Investment Services. “But capital markets have freed up so companies don’t feel like they have sit on the cash.”

It’s too early to say corporate America will return to the record levels of buybacks announced and completed in 2007 - $862.9 billion & $761.8 billion, respectively, according to Birinyi Associates.

After all, Birinyi reports buyback announcements totaled just $77.1 billion in 2009 through the end of October, well off the $345.1 billion in the same period a year ago.

But the market-data firm says that last week’s $10.98 billion worth of new share repurchase plans is more than triple the amount from the same period a year ago, when smaller firms made up the lion’s share of buybacks.

The size of the repurchase announcements isn’t the only thing bigger this year; so are the participating companies. IBM last week said it was adding $5 billion to its existing plan to buy back its own shares, Visa set a $1 billion stock repurchase program, and Internet security firm Symantec tacked on $1 billion more to its buyback strategy.
The prior week, insurance giant Travelers publicized plans to spend an additional $6 billion on its share buyback.

Some market watchers say it’s not only a vote of confidence by executives in their own companies, it’s also a sign of stabilization for both the economy and the stock market.

“If companies are getting back in the saddle repurchasing their stock, it shows strength in the overall market,” says Rob Leiphart, who tracks buybacks at Birinyi. “It shows revenues are back to a point where companies are flush with extra capital. That’s overall bullish.”

That bullish case for buybacks is simple: they remove shares from the market, boosting the value of remaining stock.

It’s also an easy way for companies to boost their bottom line, especially in a challenging time for growing revenue. If a company has 10 million shares outstanding and is going to make $10 million in profit, buying back two million shares will boost earnings from $1.00 per share up to $1.25 per share.

Share repurchase plans are also a sign that companies still see value in their own stock at the current price level. After all, a corporation knows its business best and generally does not want to overpay for its own equity.

Bearish investors argue the stock market is not cheap at these levels and that this year’s massive secondary stock sales are dragging down earnings and diluting existing share value.

Plus companies have not always had the best timing in buying back stock. Corporate repurchase announcements have previously peaked in 1987, 2000, and the record-setting 2007. Those all proved to be tumultuous years for stocks.

And, skeptics point out that these plans are not binding. Companies may suspend or scrap the buybacks altogether with little or no notice. 

"Recent buyback announcements are different than actions; we do not expect substantial buying for the remainder of 2009," said Howard Silverblatt, senior index analyst at Standard & Poor’s.

Still, some investors prefer this means of preserving cash to dividend cuts. “From a corporate standpoint, a buyback affords a company the most amount of leeway,” says Leiphart. “We’ve seen companies get clobbered because they cut their dividend. If you have a buyback and the goal is to buy back $2 billion, and you only buy back $1.5 billion, I haven’t seen where that’s dragged through the press and affected the stock.”

Moroney says smaller clients generally like to collect dividends, but institutional investors frequently prefer a buyback: “A dividend is cash on the barrelhead and buybacks can be turned off next week. But depending on your tax position, a buyback is better because you don’t realize a gain until you sell. If you get a dividend, you’re taxed on the payout.”

Moroney’s research shows that some companies are opting for a hybrid approach to rewarding shareholders. IBM paid out $2.8 billion in dividends and bought back $5.1 billion in shares over the past year. He pegs that at a handsome 4.9% yield for stockholders.

There are, of course, other uses for deploying cash such as research and development or acquisitions. Those moves can eventually create shareholder value, but it can be harder to demonstrate that in the near-term to investors.

Moroney says there may also be a less altruistic motive playing a role in the return of buybacks. “Managements are paid in stock options and share buybacks boost stock prices -- dividends do not. There are companies with huge potential for dividends but they prefer to do buybacks. If you’re paid on a stock because of an option, your self-interested view is to increase the price.”

Regardless of a company’s motivation to repurchase shares, Birinyi’s Leiphart says investors can look for more buyback announcements. “Our big clients who subscribe to the buyback data have been taking it back to companies to show them. There’s been a huge amount of activity. I don’t think we will see any direction but up.”

And that’s music to the ears of investors such as Walter Todd, co-chief investment officer with Greenwood Capital:“The more stability and growth we see in the economy the more likely we’ll see it continue. It’s a good sign for the market.”