Size
Share Buyback
A buyback is a company purchasing its own shares, which retires equity and lifts per-share figures.
Dividends pay cash out. Buybacks pay cash out too, by shrinking the share count so each remaining share owns more of the business. They are flexible: a company can stop repurchasing without the drama of a dividend cut. They are also easy to do badly. Buying stock above a sober estimate of value transfers wealth from the remaining holders to the sellers.
Judge a buyback by the price paid and by whether it is funded with surplus cash or with debt. A falling share count alongside rising total profit is the healthy pattern. A falling share count that merely disguises flat profit is financial engineering. EPS growth from buybacks is real per share and still not the same thing as a growing company.
Formula
Buyback yield = cash spent repurchasing shares over the year ÷ market cap
Live example
Apple Inc. (AAPL) last printed at $345.33 with a market cap of $5.04T. Market cap is the equity value you see above. Enterprise value would add net debt, which this quote row does not itemize.
Related
Shares Outstanding · Earnings Per Share (EPS) · Dividend Yield
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Questions
Are buybacks better than dividends?
They are better when the stock is cheap and the holder does not need income. Dividends are better when you want cash on a schedule. Tax treatment differs by account and country.
What is a buyback yield?
The cash spent on repurchases divided by market cap. Add it to the dividend yield for a rough total shareholder yield.