Buybacks or stock buybacks are when a public company decides to purchase back its own shares, decreasing the number of available shares on the open market. Buybacks raise a company’s earnings per share. It’s simple arithmetic: buybacks reduce the number of shares outstanding.
To get earnings per share, you divide total earnings by the number of shares outstanding. When you reduce the divisor-because the company has fewer shares outstanding, due to stock buybacks-the calculation gives you a higher number for earnings per share. On the whole, buyers are willing to pay slightly more for a stock with slightly higher earnings per share. When you hold a stock in your personal, taxable account and it pays a cash dividend, you have to pay tax on the dividend in the year in which you receive it. When a company initiates a buyback program the dividend isn’t distributed (and subject to tax) but the share price tends to rise and boost investor returns. This added opportunity for tax deferral may not seem like much of an advantage in any single year.
However, the magic of compound interest applies to that tax deferral. It can add up to a huge advantage over a decade or two. The advantage expands all the more if you hold off on selling until you need the money. That holding period may even last until you retire, when your income tax rate is likely to be much lower. We think investors should be just as excited for buyback programs as dividends. Enhance your stock market returns by following TSI Network and using our three-part Successful Investor strategy:
Our new report, 10 Stocks to Buy and Hold Forever, identifies 10 stocks you can hold for the long term and shows you exactly how to profit from a portfolio that’s built to last. And it’s yours FREE!
EXTENDICARE INC., $7.33, is a buy. The company (Toronto symbol EXE; TSINetwork Rating: Extra Risk) (www.extendicare.com; Shares o/s: 83.5 million; Market cap: $611.8 million; Dividend yield: 6.6%) keeps buying back shares. Under TSX approval, for the period June 30, 2023, to June 29, 2024, it repurchased 1.1 million of… Read More
Government funding is playing a significant role in this firm’s fortunes as the Ontario government in particular is stepping up to ensure quality home healthcare for its residents.
That and the company’s initiative to expand its offerings (and therefore its cash flow) should keep the high… Read More
2024 is the fifth year in a row we selected CP Rail (now CPKC after its merger with U.S.-based railway Kansas City Southern) as your #1 Conservative Buy. If you bought the stock five years ago, at the start of 2019, you’ve enjoyed a 121%… Read More
RESMED INC., $191.42, is still a buy. The firm, symbol RMD on New York, helps investors tap the growing market for medical devices used to treat sleep apnea. ResMed’s CPAP (nasal continuous positive airway pressure) devices are also used to treat patients with chronic obstructive pulmonary disease… Read More
Gen Digital is the rebranded name for NortonLifeLock (formerly Symantec—more on that below), one of our long-time tech stock favourites. The company changed its name to Gen Digital following its 2022 acquisition of European cybersecurity firm Avast plc for $8.1 billion.
Growth by acquisition adds risk—especially… Read More
Insurers write policies, collect premiums from customers, and then invest those premiums to meet future claims. That need to cover claims means they invest significant amounts of their funds in fixed-income instruments, primarily bonds. That also means high interest rates are a boon to their… Read More
ROYAL BANK OF CANADA, $148.98, Toronto symbol RY, is a buy.
On March 28, 2024, Royal completed its purchase of the Canadian operations of U.K.-based HSBC Holdings plc (New York symbol HSBC) for $15.5 billion.
HSBC operates 130 branches that mainly cater to businesses in industries that trade… Read More
Canadian Tire’s class A shares are down about 6% since the start of 2024. That’s mainly due to concerns still-elevated interest rates and higher prices force consumers to spend less on discretionary items.
However, the retailer is doing a good job managing its inventories. That cuts… Read More
FedEx’s strong financial health and strategic acumen are reinforced by the upward revision of its consensus earnings. Its impressive track record of surpassing earnings expectations further bolsters this sentiment.
Meanwhile, dividend growth and active share buybacks also underscore the management’s belief in the intrinsic value of… Read More
CANADIAN TIRE CORP., $144.07, Toronto symbol CTC.A, is a buy.
Investors benefit from the company’s 502 Canadian Tire stores. They sell automotive parts and services, and household and sporting goods; franchisees run most of the locations. The company’s other operations also enrich its outlook. They include… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
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Changes to this Policy
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