[colinmhayes]

> which offers no dividend be valued accordingly.

FWIW Meta has apparently done $15 billion in buybacks this year which gives them a 4% yield at current cap. Investors generally prefer buybacks to dividends because of tax advantages, so this should actually have helped their stock more than a 4% div yield would.

[adam_arthur]

A 4% yield is not very good when you can buy risk free treasuries yielding more.

Meta's shares outstanding have barely changed over time. Issuing equity to employees dilutes share count, buybacks counter this somewhat.

https://www.macrotrends.net/stocks/charts/META/meta-platform...

At current valuation multiples buybacks are pretty smart for Meta, but many of these companies were doing buybacks at 3% yield valuations

[colinmhayes]

Very few s&p companies are hitting 4% yields on their dividends/buybacks. Meta shares outstanding are down more than 3% since last year.

[adam_arthur]

Dividend is different than a buyback. Buying back at a 3% earnings multiple is not equivalent to a 3% dividend.

It's much worse for shareholders. The company is investing in something that yields below the risk free rate of return.

Put another way, if they gave that same money back to shareholders via a distribution, the shareholders could earn more buying US treasuries with that distribution.

Buybacks are largely motivated by execs using company funds to increase their compensation, even if ROI is poor on the buyback. Otherwise they would never buyback at such low yields. Dividends don't go to option/RSU holders.

But anyway, a buyback at 10% earnings yield like Meta has, roughly, is a good use of funds

[colinmhayes]

Buybacks have a lot of motivations. Execs trying to boost stock is certainly one. But shareholders do prefer buybacks. Claiming otherwise is just wrong. If a shareholder wants to get out of the equity and into bonds since rates are high they can cash out through the buyback.

> Put another way, if they gave that same money back to shareholders via a distribution

They literally are. Buybacks are just as much shareholder distributions as dividends.

[adam_arthur]

Buybacks are not distributions. A company can buyback 99% of it's shares and if the stock goes to 0, the shareholder never got anything. Buybacks increase ownership percentage, and only if they outpace dilution via other means.

The airlines did a ton of buybacks over the years, and their stocks are down. Owning a larger percentage of a stock that's losing value doesn't do you much good.

To say blanket that shareholders prefer buybacks is just wrong. Ignorant shareholders may prefer buybacks at 3% ROI, smart shareholders will prefer activities that yield far higher.

If I can buy an IG bond that yields 6%, why would I want my company to use their cash to buy a 3% yielding asset? Just bubble era mentality fostered by a market that was distorted to the upside via ZIRP.

[colinmhayes]

Buybacks are just distributions that give shareholders the option of taking the money or having the company reinvest it for them. If you think you can get better returns elsewhere take the distribution. If you don't let the company reinvest.