Companies buying their own stock
Like many people here on this forum, I think that dividend paying companies have been very popular because they offer income in a volatile market. Some even think they are a bubble asset class just waiting for a correction. We are in a nice position sitting on some cash after our GIC's expired. I would think that companies that invest in themselves with extra cash by buying back their own stock would be a good investment. Has this been discussed here before? It did not come up on a search. Another option is a laddered 3 year GIC . This is the safe part of our investments, we both have defined pension plans (non cola) and I work part time. Husband 71 drawing down RRSP's, no debts.
On the other hand we could keep the money in cash and slowly spend it away.....
Those are our options.....is there a list of Canadian companies actively buying back their stock for us to consider?
There are companies that prefer to buy back stock, some with or without dividends. However, they are definitely not in the same asset class as GICs. In the end, buying a company depends on their earnings, and not whether they reward purely based on stock buybacks and dividends. Skeptics would point out that stock buybacks are generally not very reliable, in that companies can and do vary the amount of the buybacks and can cease or start them at their whims, whereas most companies are far less likely to vary or change their dividends.
Google shares buybacks vs. dividends. You will find lots of debates, as each strategy has its own pros and cons.
Pay attention to the total number of shares outstanding, if you are going to use shares buybacks as a screen to pick stocks. Companies can buy back stock while issuing new stock and options at the same time. If they give tons of options to the management while buying back stock, think what it means. It's an indirect transfer of shareholders' money in the managers' pockets.
Thank you doctrine and GoldStone for your insights....I knew that it was too good to be true, just did not have any information regarding the downside of that screening process. I have been coming here for about 4 years. When I first came I knew very little about the financial industry and the market turmoil was a scary time for me. Now, 4 years later I know just enough to be very dangerous to our portfolio....I truly value opinion here. Thank you.
Here's a good intro discussion.
Dividends vs. share buybacks: The pros and cons