Stock buybacks, also known as share buybacks, are when a company purchases outstanding shares of its own stock on the open market. Share buybacks typically raise the value of a given stock holding. Stock buyback programs also 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 more for a stock with higher earnings per share. The funny thing is that, just as investors tend to underestimate the value of a buyback, they overestimate the value of a dividend reinvestment program. They put a high value on the fact that they can reinvest their dividends automatically, without paying brokerage commissions. They fail to recognize that brokerage commissions are now at historic lows. They also overlook the fact that they have to pay taxes on the full dividend each year they receive it, even if they reinvest it. That tax hit and the loss of an opportunity for tax-deferred compounding greatly outweigh what they save on brokerage commissions.
Don’t get us wrong-cash dividends are a definite plus-buy don’t overlook stock buybacks. Stock buyback can be huge win for investors. And you can make even bigger gains in the market by following TSI Network and using our three-part Successful Investor strategy:
Discover how to put an extra strength in your portfolio with our specific advice on how to identify high-quality dividend stocks. It’s all in our newly updated report, Dividend Paying Stocks: How High Dividend Stocks Can Supercharge Your Income Investing. And it’s yours FREE!
NORTH WEST COMPANY, $27.39, symbol NWC on Toronto, sells food and everyday products and services through 243 stores. Those locations are mainly in northern communities across Canada and Alaska. The company also operates in remote regions of Hawaii, the South Pacific and the Caribbean.
North West… Read More
It’s odd that while investors crave cash dividends, they rarely get excited about stock buybacks. But in some ways, buybacks (or share repurchases) are almost as good as dividends.
Stock buybacks have three major advantages:
First, stock buybacks raise a company’s earnings per share. To get earnings… Read More
Here are three reasons to avoid high-risk investments—and advice on buying blue-chip stocks instead
Investors often try to improve their investment returns by delving into high-risk and/or high-fee investment areas such as specialized investment products, options, penny stocks and so on.
It’s far better to start off… Read More
WYNDHAM WORLDWIDE CORP., $126.99, symbol WYN on New York, will now buy the hotel franchise and management businesses of LA QUINTA HOLDINGS INC., $20.18, symbol LQ on New York, for $1.95 billion in cash.
Wyndham will formally acquire La Quinta’s hotel franchise and management business only… Read More
This Maritime utility is counting on a big new hydro project in Labrador to replace some of its older coal and gas-fired plants in Nova Scotia with low-cost, clean hydroelectric power. The company’s recent purchase of U.S. power and gas distributor Teco should also pay… Read More
Stock buybacks can offer investors a number of key advantages over dividends.
We’ve always placed a high value on a sustained record of dividends, mainly because it provides something of a pedigree for stocks we recommend. But stock buybacks are also a great opportunity for investors.
While… Read More
STANTEC INC., $31.19, symbol STN on Toronto, sells a range of consulting, design and technology services. Its clients operate in the oil and gas industry, transportation and construction, among several other areas.
For the three months ended March 31, 2017, the company’s recent acquisitions and a.. Read More
SYMANTEC CORP. $30.41 (Nasdaq symbol SYMC; TSINetwork Rating: Average) (650-527-8000; www.symantec.com; Shares outstanding: 618.8 million; Market cap: $18.8 billion; Dividend yield: 1.0%) recently formed Symantec Ventures, a cybersecurity venture-capital business to serve as an incubator for startup firms. The support could include funding as well… Read More
Dear client,
STANTEC INC., $34.52, symbol STN on Toronto, sells a range of consulting, design and technology services. Its clients operate in the oil and gas, transportation and construction industries, among several other areas.
The company has agreed sell its software business, Innovyze, for $270 million U.S…. Read More
Dear Inner Circle member,
Investors often try to improve their investment returns by delving into high-risk and/or high-fee investment areas such as specialized investment products, options, penny stocks and so on. Far better to start off by putting yourself in a position to profit from human… 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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