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:
Discover how to put an extra strength in your portfolio with our specific advice on how to identify high-quality dividend stocks. It’s all in our newly updated report, Dividend Paying Stocks: How High Dividend Stocks Can Supercharge Your Income Investing. And it’s yours FREE!
A restriction imposed by the U.S. Federal Reserve forced this lender to sell a group of its loans, ultimately leading it to a 22% earnings jump.
Stock buybacks also contributed to a 32.7% jump in earnings per share for the quarter ended June 30, 2019.
The stock… Read More
Invest in the top Canadian dividend-paying stocks, and boost your portfolio returns for more income in your retirement
We’ve always placed a high value on top Canadian dividend-paying stocks with a record of dividends, mainly because that kind of track record provides something of a pedigree… Read More
Investing in value dividend stocks leads to gains—if you avoid stock picks that have high, but unsustainable, dividend payouts
One of the best ways to pick value dividend stocks with sustainable dividends is to seek out companies that have been paying dividends for at least 5.. Read More
BMTC GROUP $13.14 (Toronto symbol GBT; TSINetwork Rating: Extra Risk) (514-648-5757; No website; Shares o/s: 34.5 million; Market cap: $452.6 million; Divd. yield: 2.1%) is one of Quebec’s largest retailers of furniture, electronics and household appliances.
The company will continue to aggressively repurchase its shares. Stock buybacks reduce the total… Read More
WEIGHT WATCHERS INTERNATIONAL INC., $19.07, symbol WTW on Nasdaq, has expanded its weight-loss services to include “Wellness that works” programs. The move reflects the company’s goal of promoting healthy living, in general, rather than just weight loss.
As part of that transition, the company will change… Read More
This legal, tax and accounting information provider recently sold off a major business and is investing the proceeds in stock buybacks and improvements to its digital information systems.
Revenue continues to rise, despite a drop in earnings for the most-recent quarter as the company spent more… Read More
Stock buyback vs dividend investing may seem a clear-cut choice, but savvy investors will tell you that they can complement one another quite well
Stock buybacks, also known as share repurchases, are when a company buys outstanding shares of its own stock on the open market.
A… Read More
Investors can profit from companies that aim to increase shareholder value through stock buybacks—as well as with dividends
While investors increasingly seek out cash dividends, few are as excited about stock buybacks. Dividends are in fashion with investors right now, and that’s always a good thing… Read More
A 2014 acquisition continues to boost this stock’s revenue, and promises to add more through cannabis sales.
Even without extra cannabis revenues, this company is unlocking extra value. It recently completed a spinoff that should benefit this stock, its parent company and shareholders of both… Read More
BHP BILLITON LTD. (ADR) $48 (New York symbol BHP; Resources sector; ADRs outstanding: 1.6 billion; Market cap: $76.7 billion; Dividend yield: 4.6%; Takeover Target Rating: Medium; www.bhpbilliton.com) is a leading producer of iron ore, oil and natural gas, copper and coal.
In response to pressure from activist investor Elliott… Read More
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