2 ms·
From the company's perspective, dividends and stock buy backs are identical. Say a company has 10 shares @ $10/share, w/ a total value of $100. The company ha
by devoutsalsa 2y ago
From the company's perspective, dividends and stock buy backs are identical.
Say a company has 10 shares @ $10/share, w/ a total value of $100. The company has $10 to return to shareholders because it can't make better use of the money internally.
----Share buyback example------
- company buys back 1 share @ $10
- the company's value is decreases by $10 for having distributed the cash
- company now has 9 shares of stock at $10/share, for a total value of $90
-----Dividend example-----
- company distributes $1 to each shareholder
- the company's value is decreases by $10 for having distributed the cash
- company now has 10 shares of stock at $9/share, for a total value of $90