Stock repurchases are like bumper dividends, but they do not typically substitute for regular cash dividends.

Question

Quizplus · Accepted Answer

Stock repurchases and cash dividends serve different purposes and are not interchangeable. While cash dividends provide a regular stream of income for shareholders, stock repurchases typically aim to improve shareholder value by increasing earnings per share and reducing the number of outstanding shares. Companies can choose to do both cash dividends and stock repurchases if they have the financial resources to do so.

Stock Repurchases Are Like Bumper Dividends, but They Do Not