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Argue the position that stock dividends are better in the long run than stock buybacks as...

Argue the position that stock dividends are better in the long run than stock buybacks as a means of returning capital to shareholders

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Answer #1

Stock dividends are better than share buyback since dividends implies a steady stream of income being returned to the shareholders and also the income is pretty much assured depending on the dividend yield. While returns from share buyback is more of speculative in nature.

Additionally, most of the time the tax on dividend is borne by the firm and is tax free at the hand of the investors. Meanwhile in case of share buyback, the capital gains for the investor is taxed as per the prevailing capital gain taxation rate.

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