In the third quarter of 2008, companies in the S&P 500 spent a whopping $90 billion buying back shares of their own stock. That's pretty impressive, right? It's a heck of a lot of money … except that it's 48% less than the companies spent a year earlier, when buybacks totaled a record $172 billion.

What's going on? Well, the credit crunch is making it harder for some companies to borrow money. With consumers cutting back on their spending, companies are anticipating lower revenue and therefore lowering their earnings outlooks. In such an environment, it sure seems smart to cut back on using valuable cash to buy back shares. After all, if you're a company, you'd much rather make sure you can keep meeting your dividend obligations, and you want to conserve the rest of your cash for operations and to give you flexibility, should some opportunity or expense materialize.

The problem
Sounds good, but ironically, this is probably one of the best times for companies to buy back stock. The market has tanked, and almost every stock is in the red this year. Many are screaming bargains. It's the opportunity of a lifetime -- the best investing opportunity of the past 35 years.

Specifically, companies should buy back stock when they're considerably undervalued, to help improve shareholder value. Conversely, when companies buy back overvalued shares, they actually destroy shareholder value. So what better time than now, when stocks are cheap?

Here are some companies that did buy back a lot of shares in the past quarter:

Company

Buybacks Last Quarter

ExxonMobil (NYSE:XOM)

$8.7 billion

Microsoft (NASDAQ:MSFT)

$6.5 billion

Procter & Gamble (NYSE:PG)

$3.9 billion

IBM (NYSE:IBM)

$2.7 billion

ConocoPhilips (NYSE:COP)

$2.5 billion

Philip Morris International (NYSE:PM)

$2.4 billion

Johnson & Johnson (NYSE:JNJ)

$2.2 billion

Source: Standard & Poor's.

As an investor, pay attention to buybacks. And also consider just aiming for dividends -- they're powerful and more reliable than buybacks. Want help finding dividend-paying stocks? Try our Motley Fool Income Investor newsletter service for free, and you'll see lots of companies with dividend yields above 6%.

Longtime Fool contributor Selena Maranjian owns shares of Johnson & Johnson and Microsoft. Johnson & Johnson is a Motley Fool Income Investor pick. Microsoft is a Motley Fool Inside Value recommendation. Try our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.