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I agree the difference in the tax treatment is bad and should be fixed. But besides that, is there anything that makes buybacks worse than dividends?

rjtavares 3y ago
The cost of buybacks is affected by timing, unlike dividends. Dividends are cleaner and affect the price in well understood ways: you set a date for the elegibility, and if you bought before that you get the dividend, if you buy after you don't. Stock buybacks are less transparent (you don't buy them all at once).
orwin 3y ago
Yes, it concentrate/centralize power. If you want a new aristocracy, continue buybacks until a share is worth so much, people will start to buy share fractions, with all the shit and overhead that'll bring.
- konschubert 3y ago
  Companies do share splits all the time. Dividends also give money to people who have shares. There is not difference beteeen these two mechanisms in who gets the money.
  - disgruntledphd2 3y ago
    Dividends are better because you don't have to sell to realize the gains. I'd love to own Google and Facebook and get dividends regularly.
    - qwytw 3y ago
      How is that better? With buybacks if I want to reinvest I don't have to pay taxes on them and if I want to realize the gains I can decide when to do that myself (of course seem more like an issue in Europe and with companies which only payout yearly).
      - disgruntledphd2 3y ago
        Because it encourages longer-term ownership, and gives shareholders a stake in the future cash flows of the business. Like I said, it's the tax treatment that basically stopped growth companies giving dividends. I think that we should change said tax treatment and also make buybacks illegal but that's a bit more controversial. In any case, for both G and FB, they'd need to do buybacks anyway because of their employee share programs.
        konschubert 3y ago
        Buybacks have the same effect of encouraging long-term ownership. Given a certain amount of money, spending it on stock buybacks vs spending it on dividends returns the same amount of money to each HOLDING shareholder. In one case, they receive a small sum. In the other case, the value of their stock goes up.
- s1artibartfast 3y ago
  >people will start to buy share fractions, with all the shit and overhead that'll bring. Which is to say, very little overhead

rjtavares 3y ago

The cost of buybacks is affected by timing, unlike dividends. Dividends are cleaner and affect the price in well understood ways: you set a date for the elegibility, and if you bought before that you get the dividend, if you buy after you don't. Stock buybacks are less transparent (you don't buy them all at once).

orwin 3y ago

Yes, it concentrate/centralize power. If you want a new aristocracy, continue buybacks until a share is worth so much, people will start to buy share fractions, with all the shit and overhead that'll bring.

konschubert 3y ago
Companies do share splits all the time. Dividends also give money to people who have shares. There is not difference beteeen these two mechanisms in who gets the money.
- disgruntledphd2 3y ago
  Dividends are better because you don't have to sell to realize the gains. I'd love to own Google and Facebook and get dividends regularly.
  - qwytw 3y ago
    How is that better? With buybacks if I want to reinvest I don't have to pay taxes on them and if I want to realize the gains I can decide when to do that myself (of course seem more like an issue in Europe and with companies which only payout yearly).
    - disgruntledphd2 3y ago
      Because it encourages longer-term ownership, and gives shareholders a stake in the future cash flows of the business. Like I said, it's the tax treatment that basically stopped growth companies giving dividends. I think that we should change said tax treatment and also make buybacks illegal but that's a bit more controversial. In any case, for both G and FB, they'd need to do buybacks anyway because of their employee share programs.
      - konschubert 3y ago
        Buybacks have the same effect of encouraging long-term ownership. Given a certain amount of money, spending it on stock buybacks vs spending it on dividends returns the same amount of money to each HOLDING shareholder. In one case, they receive a small sum. In the other case, the value of their stock goes up.
s1artibartfast 3y ago
>people will start to buy share fractions, with all the shit and overhead that'll bring. Which is to say, very little overhead