Friday, February 5, 2016

Share Repurchases: An Overview

There’s always a lot of talk about share repurchases, especially by value investors and dividend investors. Some people like them, some people don’t like them, and unfortunately, some people don’t understand them. So, this article is going to explain how share repurchases work.

What are share repurchases?

Most companies start out as private companies. When they get big enough, the owner might decide to sell his company, or he may decide that if he had a lot of extra capital, he could put it to good use in expanding his business. So, a private company can decide to offer an Initial Public Offering (IPO) where they sell some of their company to the public and therefore become a public company. Of course, the company is expensive, so it’s broken up into manageable pieces called shares. A typical public company consists of millions (or even billions) of shares. Sometimes public companies offer additional shares at a later date that further increases their total number of shares. This can be because they offer shares as compensation to certain employees, or because they want to pull in some extra capital for a perceived investment opportunity.


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Thursday, February 4, 2016

Dividends Vs. Share Repurchases

Are share repurchases good or bad? The answer, as might be expected, is a bit gray.
Assuming the company has a certain amount of cash they wish to return to shareholders, the two ways they can do it are through dividends and share repurchases. Share repurchases (also referred to as a share buyback or a stock buyback) are typically more flexible for the company, while dividends are more flexible for the shareholder.

Overview

The basic answer is that share repurchases are great when the share price is undervalued, and not-so-great when the share price is overvalued. To put it into a more useful context, if you would otherwise reinvest your dividends or invest new capital into the company at current stock prices, then share repurchases are useful to you because the company basically does it for you. The alternative is that the company could pay you a higher dividend, but you’d be taxed on that dividend and reinvest it into the company anyway. On the other hand, if you would not reinvest dividends or invest new capital into the company at current prices, then share repurchases are not in alignment with your current outlook, and it would be better for you to receive a higher dividend.


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Wednesday, February 3, 2016

Annual Update – 2015 Review

Welcome to the annual 2015 update. This is part of  a series where I track our financial progress on a regular basis. I present four parts in this series: (i) Investment & Portfolio Update, (ii) Passive Income Update, (iii) Blog Update, and (iv) Goals Update.


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Tuesday, February 2, 2016

12 Value Stocks With Dividend Yields Over 3% To Consider Now!

There are plenty of stocks yielding 3% or more outside of traditional yield sectors like telecoms and utilities. Investors generally have to venture into out-of-favor industries like autos, retailing, and manufacturing to get those dividends.

Attached you can find a selection of interesting value stocks that caught my attention within recent weeks due to falling stock prices. 


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