Why are share buybacks good?

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I have noticed that a lot of companies prefer share buybacks or share repurchases instead of distributing dividends. Are share buybacks good or to be more precise are they better than just giving dividends?

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score 0 · Answer 1 · 2012-12-02T19:50:28+00:00

It can be a good signal because it can mean that there is cash surplus or that the company believes that the stocks are undervalued. On the other hand, it can also mean that the management is not effective in finding good investments and the share buyback is the best option. Share Repurchases can definitely boost the value of a stock but the opposite can happen too.