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> Stock buybacks are therefore not equivalent in any way to paying of dividends. They are extremely similar. The differences are around timeline and tax advant
by travisjungroth 4y ago
> Stock buybacks are therefore not equivalent in any way to paying of dividends.
They are extremely similar. The differences are around timeline and tax advantages, none of which you covered.
In a buyback, your percent ownership in the company will go up and the price will go up (barring other factors). You can sell some stock to keep your percentage flat and get some cash, making it like a dividend. Or, you can make a dividend like a buyback by reinvesting the dividend. Your percentage of ownership will go up.
- salawat 4y agoIf and only if people previously holding stock sell back to the company. Regardless, you realize no gains if you do not exit your interest on that stock. The exit is non-optional, and often not reenterable from.
- travisjungroth 4y ago> If and only if people previously holding stock sell back to the company. This is trivial. They just buy it on the open market. This is public stock, people are always buying and selling. > Regardless, you realize no gains if you do not exit your interest on that stock. This is the big advantage of buybacks for shareholders! It is taxed as capital gains, and you can completely defer taxes by not selling. And "exit your interest" makes it sound like you have to sell all of it. You can just sell a small portion to make it like a dividend. You don't seem to be getting this. > The exit is non-optional, and often not reenterable from. Nonsense. It is optional. You can choose to keep it as stock or turn it into cash. And you can totally re enter. It's public stock. Are you mixing up publicly traded stock buybacks with something in private companies?