In today’s video, we answer the following questions;
- Why do companies buy back stock?
- Are buybacks good for shareholders?
- Which one is better, dividends or buybacks?
- What is Rule 10B-18?
When a company buys back its own stock, it has two options; (1) the company can hold the stock in treasury and reissue at a later date or (2) the company can retire the shares to reduce shares outstanding, those shares cannot be reissued later.
Share buybacks can be beneficial if management conducts the program when shares are undervalued. If the company buys at a low enough price, the reduction in outstanding shares significantly impacts future EPS performance and results in a lower payout ratio and higher dividend increases in the future
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