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It is post tax money. Only difference from a dividend is avoidance of double taxation by shareholders as value goes up.
by koolba 7y ago
It is post tax money. Only difference from a dividend is avoidance of double taxation by shareholders as value goes up.
- mehrdada 7y agoIt's not the only difference. Dividends are paid to the shareholders of record as of a certain date. Buybacks effectively benefit all the future as-of-yet-unissued shares, e.g. unvested stock-based comp (which makes it a beloved thing for corporate executives who get their majority of $$$ that way).
- singron 7y agoJust to be perfectly precise, dividends are usually taxed as income, but an increased valuation as a result of a buyback would only be taxed as capital gains when the shares are sold. If there weren't a separate capital gains rate, then the only difference would be the tax would be collected when the shares were sold rather than when the dividend was issued. However, if you had the intention of reinvesting your dividend, then you would buy new stock with post-income-tax dollars, whereas a buyback would increase the value of your stock holdings without using your own post-tax money.