Sep 9, 2020
In recent years, stock buybacks have been getting quite a bit of attention in the financial news as companies are spending more and more money on buying back their own shares. In today’s episode, we cover several aspects of dividends and stock buybacks, including how they work, how different corporations approach distributing dividends, how buybacks affect the economy, and why you should be paying attention to them.
[02:40] Dividends – How public companies distribute their profit to shareholders through dividends.
[05:06] Value & Growth – Why some companies decide to share their profit with the investors while others reinvest their profit back in the business.
[10:07] Dividend Investment Strategies – How you can incorporate dividends into your investment strategy and why you should not solely rely on dividends to make investment decisions.
[13:46] Dividends & Tax - How dividends are taxed and what you should keep in mind when making investment decisions related to dividends.
[16:24] Stock Buybacks – Grant explains what stock buybacks are, why companies prefer to buy back their own shares, and what advantages investors get from stock buybacks.
[21:19] Negative Effects of Stock Buybacks – How stock buybacks are related to the way executives are incentivized and how it affects the investors.
[28:51] Long Term Viability – Grant shares his take on how the current system is gradually pushing executives toward unsustainable levels of stock buybacks and why executives must focus on the long term viability of the businesses.
Harvard Business Review - Why Stock Buybacks Are Dangerous for the Economy:
Stock Buybacks: A Breakdown