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A buyback is functionally equivalent to a dividend except it is more tax efficient. Much of the decline in dividends has been the rise of buybacks.
by graeme 2y ago
A buyback is functionally equivalent to a dividend except it is more tax efficient. Much of the decline in dividends has been the rise of buybacks.
- TeaBrain 2y agoBuybacks are functionally accepted as an alternative to dividends, but are not really equivalents. An important distinction is that buybacks not only benefit the shareholders like dividends do, but also benefit the perception of the company's performance by boosting per share financial figures, due to less shares remaining following the buyback. This incentivizes the leadership of a company more towards buybacks, as it not only potentially increases the value of their largely stock based compensation, but it also makes their performance look better.
- bornfreddy 2y agoOff topic, but I wish finance sites published "buyback yield" metric or equivalent (what percentage of total stock value was bought back in last quarter / year / TTM. If buybacks are treated as dividends, investors should be able to assess their returns in a similar way, imho.