I have just endured the excruciating suffering of watching the Danielle dimartino video. Biggest load of ignorant drivel i've heard since benny @Load claimed that Apple does not return enough cash to investors Post #:69056344 when in fact Apple has returned more cash to investors than any company in the history of mankind, 3/4 of a $trillion in the past decade alone:
As for Danielle's following slide from the video,
...its a load of rubbish.
Share buybacks are just another form of dividend, and a 100% routine capital management practice. Look at Apple above as an example. If Apple had not done the buybacks, it would have a lower EPS, but guess what newbies? It would have almost an additional $0.75 trillion in the bank, making the company much more valuable than it is today by that amount, $0.75 trillion
Do you people lack even the most rudimentary understanding of corporate finance? Please do not reply, the question was rhetorical ([email protected])
I had posted the following on buybacks in a previous post Post #:69090886 I repeat it here ----------------------------------- "Aren't you overstating?
If someone had a share purchased from a buy back.. do they not own it anymore and therefore they don't get a dividend payment from that time forward. And likewise, only those selling their shares can be accounted for having received cash from a buy back... Therefore you are wrong twice lol"
My esteemed friend@Ewebuteof the Internet It saddens me to see you post such weak material and risking your otherwise good reputation (except for trains, you are no good with trains)
To make matters worse, this is basic knowledge to all 18 year old first semester Commerce students. You could have easily avoided this blunder with a simple "dividend v buyback" google search, or better still, studying any basic Business Finance textbook, such as the much prescribed:
Business Finance, 12th Edition, Graham Peirson
Section 11.8 covers the topic of share buybacks. It opens with the statement:"Most cash paid out to the shareholders of Australian companies is distributed as dividends. As discussed in Section 11.1.4, changes to the Corporations Act in 1989 and 1995 mean that companies can also pay cash to shareholders by repurchasing shares.......repurchasing shares is effectively the same as paying a cash dividend ....but with significantly different tax implications for shareholders" Without getting over-technical, share buybacks can be thought of asoptional dividendsThe obvious similarity is that they are both methods for distributing cash to shareholders (you cannot receive dividends unless you are a shareholder, and you can't participate in a buyback unless you are a shareholder)
Dividends: Cash from Company -> shareholders Buybacks: Cash from Company -> shareholders.
It makes very little difference to the company whether they distribute cash through dividends or Buybacks. Both reduce shareholder equity buy the same amount, but differ in the way they are accounted for, i.e., which equity accounts are debited.But it makes a hell of a lot of difference to shareholders, because of tax, and in particular the differentials between Income tax (which applies to dividends) and capital gains tax which applies to buybacks. Low-income earners would prefer dividends (low marginal income tax rate) whereas high income earners would prefer buybacks, because they can choose the timing of realising their capital gain (e.g. after retirement, to offset capital losses etc) In most countries, share buybacks are on-market. In Australia, however, due to the dividend imputation system, many large buybacks are the so-called Off-Market-Buybacks. Notable examples are the BHP, Commonwealth Bank and Woolworths off-market buybacks. These buybacks are part dividend (enabling these companies to distribute unused franking credits) and part capital return.The good news for you, my esteemed friend, is that the above textbook has some worked examples of these off-market buybacks.Enjoy your reading.
(20min delay)