Stock buybacks, also known as share buybacks, are when a company purchases outstanding shares of its own stock on the open market. Share buybacks typically raise the value of a given stock holding. Stock buyback programs also raise a company’s earnings per share. It’s simple arithmetic: buybacks reduce the number of shares outstanding. To get earnings per share, you divide total earnings by the number of shares outstanding. When you reduce the divisor-because the company has fewer shares outstanding, due to stock buybacks-the calculation gives you a higher number for earnings per share.
On the whole, buyers are willing to pay more for a stock with higher earnings per share. The funny thing is that, just as investors tend to underestimate the value of a buyback, they overestimate the value of a dividend reinvestment program. They put a high value on the fact that they can reinvest their dividends automatically, without paying brokerage commissions. They fail to recognize that brokerage commissions are now at historic lows. They also overlook the fact that they have to pay taxes on the full dividend each year they receive it, even if they reinvest it. That tax hit and the loss of an opportunity for tax-deferred compounding greatly outweigh what they save on brokerage commissions.
Don’t get us wrong-cash dividends are a definite plus-buy don’t overlook stock buybacks. Stock buyback can be huge win for investors. And you can make even bigger gains in the market by following TSI Network and using our three-part Successful Investor strategy:
Invest mainly in well-established companies;
Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
Downplay or avoid stocks in the broker/media limelight.
This industrial stock has rebounded strongly from its pandemic lows as the economy re-opens. While supply-chain disruptions and rising costs for labour and shipping add risk, this firm continues to reward investors with higher dividends and share buybacks.
Recent acquisitions and divestments have focused the firm… Read More
Dividend reinvestment plans, or DRIPs, are plans some companies offer to allow shareholders to receive additional shares in lieu of cash dividends. DRIPs bypass brokers, so shareholders save on commissions
DRIPs also eliminate the nuisance effect of receiving small cash dividend payments. Second, some DRIPs let… Read More
Oil stocks continue to rebound from their 2020 lows as the re-opening of the global economy pushes oil and gas prices to multi-year highs. In view of new caps on greenhouse gas emissions, global oil producers are likely to focus on cutting costs and improving… Read More
CENOVUS ENERGY, $12.85, remains a buy for long-term gains. The company (Toronto symbol CVE; Shares outstanding: 2.0 billion; Market cap: $25.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 0.5%.; www.cenovus.com) completed its acquisition of rival oil producer Husky Energy in January 2021.
The combined firm is… Read More
ADOBE INC., $658.52, is a buy. The company (symbol ADBE on Nasdaq), operates through three main segments:
The Digital Media segment produces a suite of software that includes Adobe Photoshop and Adobe InDesign. The Digital Experience segment provides analytics, social marketing, targeting, media optimization, and cross-channel… Read More
Loblaw operates in one of Canada’s most competitive industries—one undergoing disruption by both technology and new entrants to the industry. The COVID-19 pandemic has only accelerated the pace of that disruption.
However, the company has invested heavily over the last few years in a number of… Read More
Learning how to pick dividend stocks successfully is a lot easier if you follow these key tips—and warnings
Do you know how to pick dividend stocks for maximum gains? For a true measure of stability, focus on stocks that pay a dividend they’ve maintained or raised… Read More
Broadridge is far from a household name, except in households where most members work in the investment business. Since Automatic Data Processing (symbol ADP on Nasdaq) spun it off in 2007, the company has become a key provider of services to financial, brokerage and wealth… Read More
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What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
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Changes to this Policy
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