Dividend payments and share repurchases are conceptually equivalent.

Question

Quizplus · Accepted Answer

Dividend payments and share repurchases are both ways of returning cash to shareholders. In a dividend payment, the company pays out a portion of its earnings to shareholders in the form of cash. In a share repurchase, the company buys back its own shares from shareholders, reducing the number of shares outstanding. Both methods have the effect of increasing the value of the remaining shares, as the company's earnings are now spread over a smaller number of shares.

Dividend Payments and Share Repurchases Are Conceptually Equivalent