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It increases the stock price and is known to have a signifcant positive effect whenver a buybackplan is announced
by Maven911 13y ago
It increases the stock price and is known to have a signifcant positive effect whenver a buybackplan is announced
- YokoZar 13y agoIt does this only because the market thinks that management thinks the shares are undervalued. If things are "efficient" then a buyback and dividend are equivalent Conversely, if shares are overvalued then a dividend payment is better for management. At any rate, the relevant thing to compare Microsoft's investments to is the opportunity cost of the money. If Ballmer spent ten billion dollars on a project that netted only a 3% ROI, then shareholders would have been better off receiving that money and putting it into other companies.
- Maven911 13y agoTheoretically but dividends are also taxed and that makes dividends less attractive as an option
- YokoZar 13y agoDividends are taxed at the same rate as capital gains, so it should make little difference to a shareholder if a company paid him 1000 dollars or raised the resale value of his stock by 1000 dollars.
- Retric 13y agoNo, because your forced to pay capital gains early thus having less money to compound. Try simulating it with 10% growth vs 5% dividend (which is used to buy the same stock) and 5% growth for 10 years.
- Maven911 13y agoI meant in terms of the corporation, buyback vs dividends, buyback will have a greater impact because of the tax factor