What if Companies Paid Dividends Instead of Buybacks?
The S&P 500 Total Return (dividends reinvested) would have been 10% lower if buybacks subbed with dividends.
But, are stock buybacks a good thing for shareholders? Yes, if done at a price below the intrinsic value of the company.
Buybacks are a good substitute for dividends, because they are not double-taxed like dividends. And if the buyback program is suspended, there are few consequences, whereas a dividend cut is usually bad news.
Image: Ned Davis Research