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Buybacks, Value and Dividends

Aaron Levitt Nov 05, 2017

What’s the best way to “value” an individual stock? Price-to-earnings ratio? Price-to-book or sales? What about its dividend yield vs. market averages? Just as there are hundreds of investors, there are hundreds of ways to find value in the market. And while the jury is out on which factor or combination of factors is the 100% correct way to find cheap stocks with real growth behind them, investors continue to search for an edge.

And they may want to add buybacks to that list.

Historically, buybacks have been lauded by many market pundits as purely smoke and mirrors, with stock grants and employee stock options often totaling more than what is retired by companies. But according to Invesco, buybacks could be an additional tool in an investor’s playbook when looking for value.

Want to learn about share buybacks? Click here.

The Other Way to Return Capital to Investors

There are really only two ways companies can return excess cash and profits back to their investors. They can pay dividends, which we all know and love. Or they can retire shares, by either buying them through private tender offerings or on the open market.

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