| From the company's perspective, dividends and stock buy backs are identical. Say a company has 10 shares @ $10/share, w/ a total value of $100. The company has $10 to return to shareholders because it can't make better use of the money internally. ----Share buyback example------ - company buys back 1 share @ $10 - the company's value is decreases by $10 for having distributed the cash - company now has 9 shares of stock at $10/share, for a total value of $90 -----Dividend example----- - company distributes $1 to each shareholder - the company's value is decreases by $10 for having distributed the cash - company now has 10 shares of stock at $9/share, for a total value of $90 |