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"A stock buyback is not much different than a dividend payout." It's very different. In a dividend payout those holding the shares and staying with the company
by neilwilson 3y ago
"A stock buyback is not much different than a dividend payout."
It's very different. In a dividend payout those holding the shares and staying with the company get the money. In a buyback those selling the shares and leaving the company get the money.
When you crunch the numbers buybacks almost always overpay for stock. From an investor's point of view they'd be better with the cash money.
It's another one of those situations where there is a comfortably theory of equivalence that the finance industry loves, that is unfortunately contradicted by the hard facts on the ground. Economics in a nutshell...
- WalterBright 3y agoYou can realize just the gain in the stock value due to the buyback if you like. Nobody said you have to sell all the stock.
- neilwilson 3y agoThere isn't any gain in the stock value. That's the point. The theory doesn't work out in practice. It's a stubborn belief in 'efficient markets'.
- noobermin 3y agoHalf of the problems of society are caused by this. Once you can attach a number to something, you can make a false equivalence and justify many ills. People often do this unknowingly or even worse, some intend it.