Buybacks: The Invisible Dividend

In a recent series of blog posts, noted NYU professor of finance and valuation expert Aswath Damodaran has fleshed out some of his thoughts on the shift from dividends to buybacks over the past couple decades, pointing out the reasons for the shift and the relative pros and cons of each method of returning cash to shareholders. Each post is worth a read (as is the rest of his work), but of particular note is his idea of an "augmented dividend": calculating the yield on a stock by combining dividends and stock buybacks. Dividend cloaking systems engagedWhat makes the idea of augmented dividends especially interesting -- aside from the fact that it sounds like something from science fiction -- is that it can turn a non-dividend-paying stock into a high-yielding one. A buyback yield can be found by dividing the amount a company spends on buybacks by its market capitalization. (Since buybacks tend to vary wildly in size, it helps to average them by adding up the trailing 12 months of buybacks and dividing that into the market cap at the time.) Here are some stocks with high buyback yields over the last year:... Read more