Dividend and Stock Buybacks:Is it Good or Bad buy back stock 200X200

Readers here at Investment Moats would consist of mainly the value investors and the dividend investors. For the dividend investors, what matters to them would be consistent and attractive dividend payouts at the right price.

Over here i do placed alot of emphasis on Free Cash Flow yield as compared to actual dividend payout (“Understanding Free Cash Flow” has a good writeup on this).

At the end of the day what matters to value investors or dividend investors are not payments but that the company is generating consistent cash flow.

What is generally omitted for discussion is Stock Buy Backs

Increasing Earnings Per Share

Recalling the article in “Understanding Free Cash Flow”, the firm’s cash can be allocated to

  1. pay off debts
  2. pay out as dividends
  3. purchase capex or subsidiaries
  4. keep as cash
  5. buy back stocks

Stock buy backs normally occurs when the company feels that their share is undervalue or …