The wave of share buybacks by public companies, which took off in the first quarter of 2011 when companies bought back nearly $90 billion shares, is continuing with buybacks through June 3 totaling $263 billion, up from $164 billion by the same date last year.

As of June 28, buybacks were announced by 40 companies including McGraw-Hill, Campbell Soup, Medtronic, Best Buy, Progressive Insurance, Smithfield Foods, General Dynamics and Prudential Financial.

One reason for the increase, according to Legg Mason Capital Management chief investment strategist Michael Mauboussin, is the estimated $1 trillion in cash that companies have on their balance sheets which executives reportedly have been reluctant to invest amid continuing uncertainty about the economy’s prospects.

In theory, Mauboussin said, buybacks are equivalent to dividend payments, but that in practice there are important differences. For one thing, dividends don’t pose timing problems. They are paid out to the holders of shares of a stock.  Buybacks, once announced, aren’t always acted upon at once.

“Besides,” said Mauboussin, “you can’t make generalizations about buybacks, as to whether they are good or bad. In many buybacks the intentions of management may not be pure.” 

An example of this would be when management is paid in options and uses a buyback to increase the value of their options holdings.

So the strategy of automatically buying a stock when a company announces a buyback -- a popular investor move -- may not always pay off. Take Home Depot. The home improvement supply company has made several share buybacks over the past few years but its stock has barely moved.

As if that were not complicated enough, this season is seeing a return of a more complex structured buyback strategy, more commonly known as accelerate share buybacks, not seen since the onset of the financial crisis in September 2008.

There were 26 accelerated share buybacks worth a total of $8.5 billion announced in the first five months, suggesting the total for the year will well exceed the 39 completed ($11 billion) in all of 2010.

ASRs can be a better deal for investors, since they assure that the announced buyout will occur, while a regular share buyback can be put on hold and not acted upon by management.