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They are completely different with respect to their impact on stock options. If you hold stock options, a dividend doesn't benefit you. You need to hold shares
by mitthrowaway2 4y ago
They are completely different with respect to their impact on stock options.
If you hold stock options, a dividend doesn't benefit you. You need to hold shares to get the dividend. In fact, the dividend can cause the share price to fall (if it was not already anticipated) as the company's capital gets drained to pay shareholders.
On the other hand, buybacks (causing a sudden, surprising increase in share price) are most impactful on those who hold options. Proportionally speaking, they increase the value of options much more than the value of shares. The share price might go up 2%, and the options 200%.
Executive compensation packages tend to consist of stock options. So buybacks benefit corporate insiders more than shareholders.
- iakh 4y agoThis isn't accurate. Options are discounted by their expected dividend payout. Unless a company is issuing either 0 dte or decades out expiration options, no options are giving any corporate exec 100x leverage.
- mitthrowaway2 4y agoThat doesn't sound right. Can you explain in more detail? The only mention of 100x was in regards to a buyback, not a dividend. Options are generally issued with a strike price equal to the current market value, to minimize the tax liability. Following the options grant, a subsequent decision to perform a share buyback would be new information to the market, not expected. Even the execs who received that options incentive package wouldn't have known at the time that they'd be doing a buyback down the road, even though they'd be rewarded for doing it.