Compared to raising regular cash dividends, initiating an open-market stock repurchase is generally not as strong a positive signal to the investors because the repurchase can easily be canceled or scaled back before it is completed.

Question

Quizplus · Accepted Answer

This is because open-market stock repurchases can be canceled at any time before completion, whereas dividend payments are more of a commitment by the company to distribute cash to its shareholders. Therefore, initiating a dividend payment is generally seen as a stronger positive signal to investors than initiating an open-market stock repurchase.

Compared to Raising Regular Cash Dividends, Initiating an Open-Market Stock