Stock buybacks, also called share repurchases, are when companies buy back their own stock. Instead of paying dividends, firms reduce the number of shares.
**Why companies do buybacks**
– Make cisco systems financial performance ratios look stronger.
– Return excess cash to shareholders.
– Support stock prices during weakness.
**Examples**
– Consistent repurchases.
– Stabilizes stock demand.
– Enhance EPS growth.
**Benefits for investors**
– Positive short-term effect.
– Suggests company believes stock is undervalued.
– Tax advantages compared to dividends.
**Risks of buybacks**
– Destroys shareholder value.
– May limit growth opportunities.
– Artificial support can mask weaknesses.
**Conclusion**
Stock buybacks are both beneficial and risky. When done wisely, as by Apple or Microsoft, they boost value and reward investors. But careless repurchases waste capital.
