Ian, an distinction, as I see it, is that although dividends are taxed, which decreases their efficiency, they are paid on a date known in advance. That provides a level playing field.
But the timing of stock repurchase programs is at the discretion of management. If they are accomplished at regular intervals, without regard to the price of the stock at the time of the transaction, I have no problem -- they would simply act like a tax efficient DRIP. But if they are triggered by externalities such as the price of the stock, or the time of exercise of employee stock options, then I do have major problems. Remember, the vast bulk of stock options result in their exercise and immediate sale.
I believe that the only legitimate reasons for engaging in stock transactions should be altering the financial structure of the company for long-range reasons, and the return of unneeded capital to investors. All too often buybacks are used to mask falling earnings per share.
TTFN,
CTC |
