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STOCK BUYBACKS: WHAT THEY MEAN FOR INVESTORS
03/27/2015

According to the AAII Journal's Aswath Damodaran, Stock Buybacks are often misunderstood, misanalysed and misdiagnosed. After a brief pause in 2009, companies returned to buying back stock with a vengeance, with more than $500 billion in stock buybacks in 2014. As stock prices rise and anxiety about bubbles and real economic growth also comes to the surface, it is not surprising that some are trying to make a connection, rightly or wrongly, to the buyout numbers. To understand buybacks, it is best to start simple. Publicly traded companies that generate excess cash often want to return that cash to shareholders, and shareholders want them to do that. There are only two ways a company can return cash to shareholders. One is to pay dividends, either on a regular basis (quarterly, semiannually or yearly) or as special dividends. The other is to buy back stock. From the company's perspective, the aggregate effect is exactly the same, as cash leaves the company and goes to shareholders... HIGHLIGHTED EVENT: Are you a new investor with limited knowledge about options? Attend an Options Industry Council (OIC) Investor Education Seminar near you ...

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Founded in 1993 as part of a multi-state settlement to resolve charges of misconduct, the Investor Protection Trust serves as an independent source of noncommercial investor education materials to help equip investors, and would-be investors, with the armor they'll need to protect them from sophisticated scams, and the knowledge they will need to better navigate their travel through the securities market.



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