Markets · 6 pages · 12 min
How buybacks differ from dividends
A buyback spends company cash on its own shares, while a dividend pays cash to every holder.
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From the opening
Both a dividend and a buyback can move cash from the company to the equity market, but they do not hand it out in the same pattern. A dividend pays each entitled share a pro rata amount, while a buyback spends cash to repurchase shares from owners who choose to sell. The opening covers dividends pay every holder, buybacks pay only sellers, and share count falls in a buyback.
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Inside
- Dividends pay every holder
- Buybacks pay only sellers
- Share count falls in a buyback
- Regular dividends are stickier
- Where the idea stops applying
- A distinction worth keeping
Sources
- Share repurchase program
- Pro rata cash dividend