The idea that there are lots of places lying around to put 10's of billions to work at high returns, and the company just isn't being creative enough, is preposterous.
Stock buybacks were outlawed for decades as insider trading. At some point it became legal, people made money, and all sorts of verbiage piles on when people make money. It’s still insider trading and insider trading does things like mucking up actual market valuations and adds leverage for a later correction to unwind, dramatically.
Companies that issue dividends usually have that dividend as a prominent feature within their business case. As in “we send out 90% of our profit as dividends after all costs/maintenance are paid.” They’re also usually almost cookie cutter businesses like REITs or mines. (Cookie cutter as in there’s well established business models already in place for decades/centuries. There’s differences one company to another but it’s characteristics of the assets of that company which change not fundamental components like renting out owned assets or digging up rocks from the ground.)
Compare that with returns to technological innovation. Econ defines tech innovation as “growth in profit not attributable to any other traditional business operation.” In a sense, a “tech company” retiring cash to their market cap is saying they can’t think of any other thing to do with that cash, including growth of their bottom line ie technology. Quitters mindset.
The obviousness of it being insider trading probably becomes even more glaring if we could see the machinations of a stock buyback. They’re probably timing the market to make sure the price increase is most pronounced or meets some metric that’s dubious.
Further, it’d be interesting to see how the stock market would respond to a company class defining themselves as stock-buy backers ala “we use 90% of our profits to buy back stocks” like the more traditional dividends. Would the stock value reflect today all the expected stock buybacks in the future at a time value discount?
Stock buybacks are not dividends. Dividends are paid out to shareholders at a declared date and come from a defined source of funds. The separation of the source of funds for a dividend and the rest of the companies accounts is clear cut. Buybacks are murky in comparison. If the market or stock has a bad day on the day of executing the buyback the actual buyback could be negated by the overall trend. Further, a company would logically not buyback their stock on such a day unless it fit their criteria otherwise. Ie insider trading. It’s not possible to call dividends insider trading in the same sense because dividends are paying out shareholder income.
Companies doing contrived "creativity" can be worse for the company than reducing the number of outstanding shares with a buyback which when done appropriately is a healthy reorganization of the capital stack.
How many mergers and acquisitions have we seen epically blow up? How many billions down the drain on projects like the windows phone or Google+? Hindsight is 20-20 but when it comes to pouring tons of money into new products we're not exactly blind either.
OK.
So they are returning that money to their shareholders. Which is kind of the point of a company.
Does that mean the company is no longer a growth stock? Probably. But not being a growth stock isn't exactly a crime against humanity.