, Columnist
Take Dividends Over Buybacks
One puts cash in the hands of investors; the other assumes management is a great market timer.
Which would you rather have: Cash or a promise?
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--Bloomberg News, March 2015
There's been a lot of chatter about stock buybacks the past few years. Some people believe share repurchases are propping up the market; others think this is a myth, or a non-story. There is the claim that buybacks are identical to dividends, but this turns out to be less true in practice than in theory. Some analysts claim dividend stocks are the new bonds, because dividends represent positive returns and tend to be more reliable than buybacks. Meanwhile, asset managers have been wondering why companies have been buying back shares rather than investing in their underlying businesses.