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Stock Buybacks Outperform Dividends: Here's the Key Advantage

The article from MSN Money discusses the advantages of stock buybacks over dividends, highlighting a key benefit for investors. Stock buybacks, or share repurchases, occur when a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This action can increase earnings per share (EPS) because the same amount of earnings is spread over fewer shares. The primary advantage mentioned is tax efficiency: when a company repurchases its stock, shareholders do not have to pay taxes on the transaction until they sell their shares, potentially at a lower capital gains tax rate compared to the immediate taxation of dividend income. Additionally, buybacks provide companies with flexibility in returning capital to shareholders, as they can choose when to buy back shares based on market conditions and their financial health, unlike dividends which once started, are expected to continue. The article also notes that while buybacks can signal that a company's management believes its stock is undervalued, they can also be criticized if used to artificially inflate stock prices or if they occur when the stock is overvalued.

Read the Full MSN Article at:
[ https://www.msn.com/en-us/money/top-stocks/stock-buybacks-outperform-dividends-here-s-the-key-advantage/ar-AA1w9F4K ]