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My understanding is that stock buybacks are generally better than issuing a dividend for the simple reason that with a buyback, an owner can choose to sell (and
by alasdair_ 6y ago
My understanding is that stock buybacks are generally better than issuing a dividend for the simple reason that with a buyback, an owner can choose to sell (and incur a taxable event) or not sell, while with a dividend the taxable event is forced upon them.
- vmception 6y agoA convenient reality as they can also just be used to constrict the supply of shares on market more and more, which is what they do. How also convenient that it can result in gains much more amplified than dividends. Yes, your observation is also true. But lets not pretend companies were really trying to choose between dividends and buybacks, most don't do dividends and ultimately never return capital to shareholders, which is the point of stock: to act as a conduit in sharing earnings.
- alasdair_ 6y ago> But lets not pretend companies were really trying to choose between dividends and buybacks I’m not pretending. And most companies eventually are designed to return capital to shareholders - otherwise why would anyone buy them?
- mjul 6y agoThere is also the tax perspective: in many jurisdictions dividends and capital gains are taxed differently, often with a higher tax on dividends. In that case buybacks are better for investors.