Question

Share buy-backs send a stronger signal than dividends to the market about management's belief that the company's prospects are good.（True or False）

Answer 1

True.

Companies reward their shareholders in two main ways, by paying dividends or by buying back shares of stock. An increasing number of blue chips, or well-established companies, are doing both. Paying dividends and stock buybacks make a potent combination that can significantly boost shareholder returns.The main difference between dividends and buybacks is that a dividend payment represents a definite return in the current timeframe that will be taxed, whereas a buyback represents an uncertain future return on which tax is deferred until the shares are sold.so, Buying back its own shares may be regarded as a sign of management’s confidence in a company's prospects.