By Kiplinger Staff
From Kiplinger’s Personal Finance
Question: What are share buybacks? And as an investor, should I be glad about share buybacks or not?
Answer: Companies have at their disposal two main options when they want to return cash to shareholders.
Dividends tend to be preferred by income investors. A dividend is a cash payout to shareholders, typically issued on a half-yearly basis. The other method is to use a share buyback. This means just what it says—the company buys back its own shares.
It’s easy to see why shareholders like dividend payouts. But how do buybacks benefit shareholders? Well, when a company buys and cancels some of its own shares, the remaining shareholders are left holding a greater proportion of the company….