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When a company uses its cash to buy back its own shares from the market.
Why It Matters
Buybacks are another way companies return cash to shareholders (besides dividends). When a company buys back shares, there are fewer shares outstanding, so each remaining share owns a bigger piece of the company. This boosts earnings per share and often the stock price. Apple has spent over $600 billion on buybacks - more than most companies are worth.
Key Points
- Reduces share count, increasing EPS even if total earnings stay flat
- More tax-efficient than dividends for shareholders (no immediate tax)
- Critics argue companies should invest in growth instead of buybacks
Related Terms
Common Questions
When a company uses its cash to buy back its own shares from the market. Buybacks are another way companies return cash to shareholders (besides dividends). When a company buys back shares, there are fewer shares outstanding, so each remaining share owns a bigger piece of the company.
Buybacks are another way companies return cash to shareholders (besides dividends). When a company buys back shares, there are fewer shares outstanding, so each remaining share owns a bigger piece of the company. This boosts earnings per share and often the stock price. Apple has spent over $600 billion on buybacks - more than most companies are worth.
Reduces share count, increasing EPS even if total earnings stay flat
More tax-efficient than dividends for shareholders (no immediate tax)
Critics argue companies should invest in growth instead of buybacks