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> Buybacks are almost solely to artificially trigger stock option targets for CEOs, right? Otherwise that is money that should be paid out as a dividend or rein
by koolba 8y ago
> Buybacks are almost solely to artificially trigger stock option targets for CEOs, right? Otherwise that is money that should be paid out as a dividend or reinvested into operations and research.
No buybacks provide a potential tax advantage for investors. Dividends have tax consequences in the year that they're received. Buybacks lift the price of the stock by an equivalent amount but do not force the investor to realize the gains so they can defer the taxes to a later date.
- kaycebasques 8y ago> so they can defer the taxes to a later date. This assumes that the share price has maintained that elevated level at a later date. Ideally, you want to cash out on some long-term positions right around the time of the buybacks. The buybacks have raised the share price, but you’re only paying long-term capital gains taxes, which used to be capped at (I think) 15% for all investors, regardless of income bracket.