ELi5: Why do people dislike stock buybacks, but not stock dividends?

2.93K views

How are stock buybacks any worse than dividend payouts to investors?

I get how they are logistically different, but to me, whether you give the investors cash that they use to buy more stock, or you internally increase the value of a stock by buying it back with company funds, the result is the same – Investors get richer at the cost of investment.

Not saying buybacks aren’t bad, but I guess I just don’t understand the hate relative to dividend payments.

In: 98

67 Answers

Anonymous 0 Comments

Stock buybacks often deplete cash reserves, and if the stock then goes down the company is in even worse shape than before. And if the stock goes up, there’s a reluctance to sell to generate cash, so again, operating cash is too low. But for a while it was seen as “what all the smart finance people are doing” so a lot of companies that should not have done it, did it.

You are viewing 1 out of 67 answers, click here to view all answers.