CORPORATE STOCK BUYBACKS HAVE PHONEY RESULTS

Ultimately for the professional investors, what matters is whether corporations are growing their earnings, and increasing revenues is more important that increasing earnings through increased efficiency.

To say that buying back stocks return value to the stockholders is a fraud.  If the company does not want to raise their dividends, they could issue a special dividend for the amount of the buybacks.  This would not commit the corporation to continue such a dividend but be a one-time thing.

The fad of corporations buying back their stock has two phony effects.  One is that it increases the price/earnings index (P/E) without showing increased earnings, i.e. buying a lot of stock at the market price tends to move the price of the stock upward without increased earnings.  It also shows the company does not know how to invest its money to grow the company, i.e. it wastes corporate money.  Companies are actually borrowing money to pay for these stock buybacks since interest rates are so low, but they are still paying some interest charges.

I know of no case where increasing the P/E of a stock where the company has declining or flat earnings results in a stock increase, though there may be a short pulse upward after the buyback because of amateur investors.  This is because the pros are not fooled.

Oh, in a few cases some stock buyback might be necessary to get stock for stock options of its employees, but that is not the reason most stock buybacks are done.