Dividends and share buybacks are both ways to return capital to shareholders. It's easy to see how a cash dividend returns cash to shareholders but a little more difficult to understand why share buybacks are a payout to shareholders and why share buybacks are equivalent to dividends. In this video, I walk you through a concrete example of how dividends and share buybacks are economically equivalent. Sometimes this is known as dividend irrelevance.
This concept is important to understand because there is a lot of talk on how buybacks are detrimental to a company/workers/economy/etc, but nobody seems to mind dividends being paid out. This boggles my mind and I hope this video can illuminate the issue.
