The real – and sometimes forgotten –- point of holding a stock is that you own a part of a company and are entitled to a piece of its profits. And there are two real ways that a company can show its investors some love and distribute some of those profits. The first is handing that cash over to investors as dividend checks. The other is through buying back shares of its own stock.
Historically, dividends have ruled the roost, but in more modern times, buyback activity has quickly become number one. And that’s a problem when that activity starts to dry up.
With firms buying back fewer shares these days, should investors start to worry? Are buybacks truly flashing a danger signal? The simple answer might be yes.
Want to learn about share buybacks? Click here.