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Politics : Formerly About Advanced Micro Devices
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To: Gary Ng who wrote (36169)8/18/1998 1:28:00 AM
From: d[-_-]b  Read Replies (1) of 1579731
 
Gary, a share repurchase adds to the value of the stock holders current position. A dividend is a direct distribution of cash, which requires overhead (check printing) and taxes on it's recipients.

I would hope, even naively, the directors have a good idea of the future (profit potential) of the company. Therefore if they gave out a large cash dividend I would suspect they have little faith in the companies near term prospects. A stock repurchase gives the opposite signal in that investors and the investment community are emboldened by such repurchases as a sign of future strength/faith by the directors.

Utilities pay higher dividends as they usually have pretty dismal growth rates, along with legal limitations on how much they can charge thus how much they can make. This is the classic retired/conservative investment vehicle.
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