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by insane_dreamer 596 days ago
Most companies should be banned from doing this.
2 comments

Buybacks are just dividends with better tax implications that somehow make people angry.

Companies historically are expected to pay dividends, at least when their business is doing well. Business at Intel was doing well for most of 1990-2017. There was some time after the Pentium 4 stopped scaling before the Pentium 4M offered a recovery, and the Itanium mess; but overall pretty good until 2017.

Buybacks aren't exactly like dividends because they directly affect the pricing of the stock by interfering with the supply and demand. That said I think people are mostly angry about the conflict of interest where CEOs that have current and future shares are making decisions by what will maximize their personal returns rather than what's best for the company and shareholders.

When a company with growth prospects does well it should invest those $$$'s into things like R&D and expansion. Companies that pay their profit as dividend are generally not expected to grow as much and their stock prices (P/E) tends to reflect that.

That said the taxation aspect is maybe a problem and should be addressed if it's not working as intended.

> Buybacks are just dividends with better tax implications that somehow make people angry.

Yeah, buybacks are the new boogieman. Let me decide when to take the tax hit on an investment and not be forced.

Ok so I prefer dividends as I think that they encourage better behavior on the part of both investors and companies.

I think that buybacks definitely create a massive conflict of interest for C levels remunerated based on share price or EPS, and I dislike that I must sell to realize any gains. But perhaps this is a niche position .

What is wrong with giving the profit to shareholders? That is why the shareholders bought the shares.
It creates a massive conflict of interest for the company executives and favors short-term profits vs long-term sustainability of the company.