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Author: madmarv Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1933  
Subject: Re: Dividends and the New Tax Law Date: 12/3/2003 1:43 AM
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Wouldn't it make more sense for companies to buy back stock? Stock buybacks reduce the number of shares outstanding (thereby increasing each investors ownership in the company) which increases the EPS. And, best of all, it is a non-taxable event to the investor.

That is pretty much what companies were doing already and the effect on stock prices were negligible. CEOs will try just about anything to boost their stock prices. The popular view regarding dividends vs. buybacks is that dividends represent a commitment to future cash distributions whereas buybacks are supposed to be opportunistic. The dividend payout ratio is still very small for most companies so the gesture is not all that hard to repeat.

IMO buybacks are still more advantageous to shareholders than dividends but capital allocation isn't necessarily a consideration for management.

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