Quotes About Buybacks

Companies are returning a lot of money to shareholders through dividends and buybacks. And a lot of people say that's not a good use of capital. I think that's normal reallocation of capital.

Some managements do not even think of buybacks as an option. The idea of shrinking their equity base repels them. Their inclination instead is to get bigger, and this often leads them to pay rich prices for acquisitions that never earn their keep.

The herd-like behaviour of companies and their managements never loses its power to astound. All too often, when one company decides that buybacks are the thing to do, then its competitors will play the game too. By the same token, capital raising (secondary issues) often appears at the same time among multiple companies in the same industry. One reason they act together is that no company wants to see competitors gain a funding advantage.

There are several things that can create an alpha - stock buybacks are one. High dividend yields are another, especially nowadays because the stock market yields more than the banks and the tenure treasury. But by and large, it tends to be companies with a strong cash flow, rising sales, accelerated earnings, a profit margin expansion.

The theory stresses that a stock's value ought to be based on the stream of earnings a firm will be able to distribute in the future in the form of dividends or stock buybacks.

How much do companies use buybacks to fool shareholders and the markets about the actual health and prospects of their companies? How much do executives, each being paid with stock and options worth millions and sometimes hundreds of millions, use buybacks simply to enrich themselves?