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Comment by WalterBright | Hacker News Reader

A stock buyback is not much different than a dividend payout. Calling it "appeasement" is kinda ridiculous. Investors invest to get returns.

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It is absolutely different because in order to recoup the benefit of a stock buyback you need to sell your holdings. Dividends, by contrast, accrue to those who maintain holdings.

Buybacks work very well for executives paid in stock who diversify out of their company stock with suspiciously convenient timing, and speculators.

Sorry, there's no difference between a $100 stock paying a $10 dividend and doing a buyback which increases the stock price to $110. You can always sell $10 to realize the same cash in your pocket.

> and speculators

Everybody who invests is a "speculator".

Speculation is defined as trying to sell something at higher prices, generally short term. Bitcoin or gold are examples of speculations.

Investors on the other hand are not necessarily interested in price fluctuation but owning their share of the cash flow through growth or dividends.

Investors always try to sell at higher prices.

You know you can hold a stock forever without having to sell it? I have shares that I own from 17 years with absolutely no intention to sell, they pay me in dividends more in one year than I paid for them almost two decades ago.

That doesn't mean you'd be trying to sell for lower prices, does it?

A (sufficiently rational) investor's willingness to sell is mainly a function of current price vs. expected future returns compared to other viable alternatives - which of course includes the dividends paid and any other benefits they might gain from ownership. And yes, there's also changes in personal need for currency, psychological reasons, etc. but I'd consider these special cases.

Even in your case if you had any good indication towards the stock you're owning being severely overpriced, the likely optimal thing to to would be to sell and dump the money into the next best alternative.

I'd also suggest to be careful in the assumption that "holding a stock forever" is a good idea. Very few companies have existed forever so far.

You're speculating every time you decide not to sell it.

So let's just go with this and say we draw a line between short term + higher risk and long term + lower risk investors.

I still haven't seen the actual argument for what would make a difference when it comes to Dividends vs. Buybacks.

> actual argument for what would make a difference when it comes to Dividends vs. Buybacks.

to some people, it's a psychological difference, not a financial difference.

Except when you opt to reinvest dividends. Buybacks were invented as a tax dodge.

"A stock buyback is not much different than a dividend payout."

It's very different. In a dividend payout those holding the shares and staying with the company get the money. In a buyback those selling the shares and leaving the company get the money.

When you crunch the numbers buybacks almost always overpay for stock. From an investor's point of view they'd be better with the cash money.

It's another one of those situations where there is a comfortably theory of equivalence that the finance industry loves, that is unfortunately contradicted by the hard facts on the ground. Economics in a nutshell...

Half of the problems of society are caused by this. Once you can attach a number to something, you can make a false equivalence and justify many ills. People often do this unknowingly or even worse, some intend it.

You can realize just the gain in the stock value due to the buyback if you like. Nobody said you have to sell all the stock.

There isn't any gain in the stock value. That's the point. The theory doesn't work out in practice.

It's a stubborn belief in 'efficient markets'.

Significant difference on tax for shareholders, at least in Australia

Same in North America.

Nope.

My understanding is US also have significant differences between income and capital gains taxes, I though even more so than Australia.

Could you explain why you said "nope"?

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