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1. Stock buybacks are always anti-dilutive regardless of the value of the stock, and so investors always benefit as future earnings are concentrated amongst few
by nr378 3y ago
1. Stock buybacks are always anti-dilutive regardless of the value of the stock, and so investors always benefit as future earnings are concentrated amongst fewer shares (all other things being equal). It's true that a lower price/value increases the magnitude of this effect, but the effect is always present.
2. Zero income stocks can still do buybacks when they're returning capital raised from shareholders to shareholders (this is essentially just partially reversing a funding round, which again undoes some of the dilution).
3. Companies can be deemed to be significantly valuable without paying any dividends. Companies that have a long history of paying dividends but then suddenly stop tend to be in distress, which is then reflected in their share price.
- daft_pink 3y agoThese statements might be logically true, but I feel the logic ignores the overall strategic factors involved in buying back stock and that management needs to consider whether the stock is over or under valued, whether earnings are strong enough for this to make logical sense and the supply and demand among investors for dividend stocks and the ultimate value of a single lump sum distributed to investors vs the value of increased future earnings to the investor from the anti-dilutive impact of buying back stock. Discussing only the tax strategy as is happening in this thread is really stepping over some really important strategic operational factors.