Shareholder return - Share buybacks

6 important questions on Shareholder return - Share buybacks

What is another way to return shareholder equity to shareholders without actually distributing dividends?

Share buyback

What is a share buyback?

To buy back own shares and to then destroy these shares, thereby reducing the number of shares held by shareholders.

What happens to the non-selling shareholders after the share buyback?

They will own a larger portion of the company.
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How are the selling shareholders and non-selling shareholders compensated?

  • Selling: by receiving cash for the shares they sell.
  • Non-selling: by owning a larger part of the company.
Therefore profiting in the future from increased earnings per share and possibly from a bigger dividend per share.

Why do companies and shareholders often prefer share buybacks over dividend payments?

Share buybacks are often a more tax-efficient way to return cash to the shareholders.
Also, a constant share buyback activity can stabilise (or raise) the share price in the market over time, which shareholders also like.

What are treasury shares?

Bought back shares on the balance sheet of a company. They are cancelled (destroyed) after purchase in order to make a share buyback complete.

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