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It is absolutely different because in order to recoup the benefit of a stock buyback you need to sell your holdings. Dividends, by contrast, accrue to those who
by remich 3y ago
It is absolutely different because in order to recoup the benefit of a stock buyback you need to sell your holdings. Dividends, by contrast, accrue to those who maintain holdings.
Buybacks work very well for executives paid in stock who diversify out of their company stock with suspiciously convenient timing, and speculators.
- WalterBright 3y agoSorry, there's no difference between a $100 stock paying a $10 dividend and doing a buyback which increases the stock price to $110. You can always sell $10 to realize the same cash in your pocket. > and speculators Everybody who invests is a "speculator".
- epolanski 3y agoSpeculation is defined as trying to sell something at higher prices, generally short term. Bitcoin or gold are examples of speculations. Investors on the other hand are not necessarily interested in price fluctuation but owning their share of the cash flow through growth or dividends.
- WalterBright 3y agoInvestors always try to sell at higher prices.
- epolanski 3y agoYou know you can hold a stock forever without having to sell it? I have shares that I own from 17 years with absolutely no intention to sell, they pay me in dividends more in one year than I paid for them almost two decades ago.
- erur 3y agoThat doesn't mean you'd be trying to sell for lower prices, does it? A (sufficiently rational) investor's willingness to sell is mainly a function of current price vs. expected future returns compared to other viable alternatives - which of course includes the dividends paid and any other benefits they might gain from ownership. And yes, there's also changes in personal need for currency, psychological reasons, etc. but I'd consider these special cases. Even in your case if you had any good indication towards the stock you're owning being severely overpriced, the likely optimal thing to to would be to sell and dump the money into the next best alternative. I'd also suggest to be careful in the assumption that "holding a stock forever" is a good idea. Very few companies have existed forever so far.
- WalterBright 3y agoYou're speculating every time you decide not to sell it.
- erur 3y agoSo let's just go with this and say we draw a line between short term + higher risk and long term + lower risk investors. I still haven't seen the actual argument for what would make a difference when it comes to Dividends vs. Buybacks.
- chii 3y ago> actual argument for what would make a difference when it comes to Dividends vs. Buybacks. to some people, it's a psychological difference, not a financial difference.
- dboreham 3y agoExcept when you opt to reinvest dividends. Buybacks were invented as a tax dodge.