Dividends are Better Than Buybacks

There is a lot of talk on these boards, in the WHC forum, about how good buybacks are. The basic argument seems to be that WHC can buy their stock at a cheap price (better than any alternative investment) and the reduced share-count will improve earnings per share and dividends per share for long term shareholders (hence share price appreciation).

All of the above makes sense.

HOWEVER, I am yet to see a compelling argument about why are share buyback is better than a dividend (of the same gross amount).

Any shareholder can effectively replicate the effect of a share buyback, by using the dividend to buy additional shares on market themselves. By doing so the shareholder will have the equivalent higher earnings and dividends on their same initial investment, by virtue of the fact they have more shares. Obviously the value of their holding is increasing at the same time, reflecting the same share price appreciation impact of a buy-back.

Individual shareholders also have the advantage of making decisions based on their own individual tax circumstances, and have more flexibility in relation to the timing of buying additional shares (vs the rules associated with a buy back). As a result they should be able to achieve a better outcome than a buy back (i.e. buying a dip).

Also, the company needs to complete the buyback using after tax funds, so it doesn't seem overly tax effective to me. Compare that with a shareholder who can turn some or all of franking credits into cash, and therefore effectively buy even more shares.

So, to my mind, a dividend provides greater flexibility for shareholders vs a buyback. A shareholder can replicate a buy back if they wish (perhaps better), or they can use the money for any alternative means, depending on their circumstances.

The only nuance i see, is related to the individual tax circumstances for the individual shareholder vs the rules and tax treatment of a buyback. There may be some cases where the tax benefit associated with a buy-back leads to a better outcome for some shareholders. I would appreciate if anyone can enlighten me.