Stocks that pay good dividends and also have significant stock buyback programs provide numerous benefits to investors. These benefits include:
- Share reductions from buybacks allow the stock to increase its dividends per share.
- Buybacks act as a natural buffer for the stock.
- Earnings per share increases for the same amount of net income.
- Buybacks act to sterilize share dilution from management and employee options.
- Lower share counts over time increase the remaining shareholders’ stake in the company.
- Compared to dividends, buybacks are a much more tax-efficient return of capital.