4 ms·

Most profits are distributed by capital (like share price) increases rather than dividends.

miohtama 2y ago
Share buybacks and dividends exist and are used in the approx same ratio, so it's probably incorrect to say most profits. Also buybacks do not change the pool of dividend receivers.
- kklisura 2y ago
  Data from 2023, by Aswath Damodaran, says that 40.87% of companies are doing buybacks and that buybacks are 64.28% of all cash returned [1][2]. US is leading in this segment here wrt to rest of the countries. [1] https://aswathdamodaran.blogspot.com/2023/03/data-update-7-for-2023-dividends.html https://aswathdamodaran.blogspot.com/2023/03/data-update-7-f... [2] https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgdnX4UbnL9XuDQeOXuSBlT-ZEO-hY6LVx71QAiOuRLHJwzEtS01wxxYBEB3Q2FH9Cgha0AlnPzKd1b20Tu8BEmUy5GbQMop0M1cRwhkqiTLtJ-NtURbrXWgZYcCKi7gWpIhr9z22G8INIJZVFTHwDpjz7_98AeszE8XE5iKFNJJzSAKz7UbYA-PAzX/s1247/RegionTable.jpg https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg...
pwg 2y ago
Stock dividends and stock price appreciation are two sides of the same coin. Both are "money returns to investors in the business". All that differs between them is the tax treatment each gets come tax time.
- lesuorac 2y ago
  > All that differs between them is the tax treatment each gets come tax time. And that if you hold a stock for say 10 years and somehow sell during a recession you could make ~0$ on that stock if it only did buybacks. While with a dividend you'd have come out ahead. Conceptually they have very different incentives as well. With buybacks you want a company to have high volatility as well as to make short term decisions so that you can buy a dip, ask for say lay-offs, and sell as it goes up. With dividends you want the company to make longer term strategic decisions so that their revenue goes up and you get a larger dividend.
  - toast0 2y ago
    > And that if you hold a stock for say 10 years and somehow sell during a recession you could make ~0$ on that stock if it only did buybacks. While with a dividend you'd have come out ahead. A stock with buybacks should be compared to a stock with dividend reinvestment. If you do something other than reinvest dividends, you should sell some shares every year.

Share buybacks and dividends exist and are used in the approx same ratio, so it's probably incorrect to say most profits. Also buybacks do not change the pool of dividend receivers.

kklisura 2y ago
Data from 2023, by Aswath Damodaran, says that 40.87% of companies are doing buybacks and that buybacks are 64.28% of all cash returned [1][2]. US is leading in this segment here wrt to rest of the countries. [1] https://aswathdamodaran.blogspot.com/2023/03/data-update-7-for-2023-dividends.html https://aswathdamodaran.blogspot.com/2023/03/data-update-7-f... [2] https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgdnX4UbnL9XuDQeOXuSBlT-ZEO-hY6LVx71QAiOuRLHJwzEtS01wxxYBEB3Q2FH9Cgha0AlnPzKd1b20Tu8BEmUy5GbQMop0M1cRwhkqiTLtJ-NtURbrXWgZYcCKi7gWpIhr9z22G8INIJZVFTHwDpjz7_98AeszE8XE5iKFNJJzSAKz7UbYA-PAzX/s1247/RegionTable.jpg https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg...

pwg 2y ago

Stock dividends and stock price appreciation are two sides of the same coin. Both are "money returns to investors in the business". All that differs between them is the tax treatment each gets come tax time.

lesuorac 2y ago
> All that differs between them is the tax treatment each gets come tax time. And that if you hold a stock for say 10 years and somehow sell during a recession you could make ~0$ on that stock if it only did buybacks. While with a dividend you'd have come out ahead. Conceptually they have very different incentives as well. With buybacks you want a company to have high volatility as well as to make short term decisions so that you can buy a dip, ask for say lay-offs, and sell as it goes up. With dividends you want the company to make longer term strategic decisions so that their revenue goes up and you get a larger dividend.
- toast0 2y ago
  > And that if you hold a stock for say 10 years and somehow sell during a recession you could make ~0$ on that stock if it only did buybacks. While with a dividend you'd have come out ahead. A stock with buybacks should be compared to a stock with dividend reinvestment. If you do something other than reinvest dividends, you should sell some shares every year.