Member Info for dan222

Following on from my dividend v buybacks post, I was thinking further about buybacks. Do they represent any return of value at all, or are they just a waste of money?

I understand that after a buyback there are less shares in issue, so in theory future profits are shared among fewer shareholders and each gets more.

But isn't the money spent on buybacks also reducing the size of the business, and thus reducing future profits compared to if the money was either reinvested in the business, or simply kept in the back and not spent on share buybacks?

So buybacks are resulting in smaller future profits shared among fewer shareholders, for a net effect of zero, or in other words all the money spent on buybacks is wasted.

I'm hoping BP might go some way towards reinstating the dividend. I would have thought it's politically a lot easier to restore the dividend (helping pensioners) than to keep chucking billions at buybacks.