Instead of dividends, management has two alternative methods to indirectly return cash to shareholders. The first is via share buybacks, while the second is to reduce debt.
Share buybacks reduce outstanding shares, thereby increasing the ownership percentage for shareholders who haven't sold their holdings. In simple terms, after a share buyback, there are fewer individuals sharing the company's future profits.
Therefore, individuals who favor dividends are rational, rather than being purely driven by emotions.Research has indicated that stocks with higher dividend yields tend to generate superior returns compared to those with lower dividend yields.
Finally , investors love dividends (I know some don't) because they see the actual cash flowing into their bank accounts, and feels more concrete compared to capital gains reflected on paper.[Happy] [Happy] [Happy] [Happy]
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