Question

Assume that you are an investor/shareholder, do you (personally) prefer dividend or stock repurchases? Why? Explain.

Answer 1

Stock repurchase means purchasing stocks from the investors by the company. This can be done by cash payment to repurchase stock.
b. Reasons to repurchase Stock
1. It is done to increase ROE for equity investors or owners.
2. Stock purchase is done when promoters feel price of stock is undervalued.
3. It is done when companies have excess cash .

Investors might prefer a stock repurchase to a dividend payment because of tax consideration where they have to pay dividend tax at income tax rate , whereas capital gains tax can be planned if investors time the sale of investors.In case of buy back companies buy at higher price then market so investors get sure shot capital gain