Stock Buybacks vs. Dividends: Which is Better for You?

When companies have extra cash, they either give it to you directly (dividends) or buy their own shares back (buybacks).

The Dividend Lock-in

Dividends are 'forced' sales of a portion of your wealth, which can trigger taxes immediately.

The Compounding of Buybacks

By reducing the number of shares, buybacks making your remaining shares more valuable over time without immediate tax consequences.

The Signal

Both are signals of financial health, but buybacks suggest management thinks the stock is currently undervalued.