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A stock buyback only increases the fundamental value of the company if it results in an increase in dividends per share. A company that buys back stock instead
by bokonist 18y ago
A stock buyback only increases the fundamental value of the company if it results in an increase in dividends per share. A company that buys back stock instead of paying dividends, and also has no intention of ever paying dividends, would only be valuable in the way a baseball card is valuable.
- fallentimes 18y agoRight, which is why I said "mature company" (who is hopefully, by then, issueing dividends :-D). At the same time, if a company issues dividends it can't afford to pay (cough Citi cough) this can be devastating to a Company's prospects. At it's core, the whole reason stocks are worth anything to begin with is the anticipation of future dividends (DCF).