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:
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CGI’s shares hit a record high of $160.40 on March 21, 2024, but have dropped recently on fears that businesses may cut spending on technology services as they cope with higher operating costs and interest rates. However, that may be a false economy, as CGI… Read More
We continue to recommend all investors own at least one of Canada’s railways due to their importance to the national economy. While our top pick is Canadian Pacific Kansas City Ltd. (Toronto symbol CP), we also like the outlook for its main rival, Canadian National.
After… Read More
CANADIAN PACIFIC KANSAS CITY LTD., $111.63, Toronto symbol CP, is your #1 Conservative Buy for 2024.
The company took its current form in April 2023 when it acquired U.S.-based railway Kansas City Southern.
CP paid $31 billion U.S. in cash and shares for KCS. At that time,… Read More
CANADIAN NATIONAL RAILWAY CO. $168 is a buy. Canada’s largest railway (Toronto symbol CNR; Conservative-Growth Payer Portfolio, Manufacturing & Industry sector; Shares outstanding: 637.6 million; Market cap: $107.1 billion; Dividend yield: 2.0%; Dividend Sustainability Rating: Highest; www.cn.ca) raised your quarterly dividend by 7.0% with the March 2024 payment. The… Read More
VISA INC. $275 is a buy. The company (New York symbol V; Conservative Growth Portfolio, Finance sector; Shares outstanding: 2.05 billion; Market cap: $563.8 billion; Price-to-sales ratio: 17.0; Dividend yield: 0.8%; TSINetwork Rating: Above Average; www.visa.comwww.visa.com) operates the world’s largest electronic-payments network. It processes credit, debit, prepaid and… Read More
Look for top tech companies in Canada with hidden assets in research spending, and potentially profitable niches for your best chances of success
The success or failure of new tech stocks depends on a variety of factors. There may be benefits to investing in new technology,… Read More
In addition to Suncor (see page 41), we also like the outlook for these three oil producers. Like Suncor, they have used their stronger cash flows in the past few years to pay down debt. That is giving them more room for dividend increases and… Read More
According to the International Energy Agency, global oil demand grew by 2.3 million barrels per day in 2023 to 103 million barrels. The agency now expects oil use to increase by 1.3 million barrels a day in 2024. That higher demand has helped push up… Read More
Loblaw has come under fire in the past few months from politicians and consumer advocates complaining that it earned “excessive profits” during and after the COVID-19 pandemic. Despite the threats of new taxes and rules on how food sellers operate, the stock has gained an… Read More
FEDEX CORP., $284.32, New York symbol FDX, remains a buy.
The company delivers packages in the U.S. and 220 other countries.
The stock rose 13% this week after FedEx reported better-than-expected quarterly earnings (excluding unusual items). It also increased its share buyback authorization.
In its fiscal 2024 third… 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?
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Changes to this Policy
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