A stock buyback is a strong sign of corporate financial health. When companies buyback significant numbers of their own shares, it demonstrates that a company has sufficient capital to both cover it s expenses and make a major investment. Buybacks increase earnings and the value of shares. When a company buys back stock, the total number of shares outstanding are reduced. That increases the price of every share you own as well as earnings.
Stock buybacks anticipate higher share prices.
Buybacks cuts your taxes. If a company pays you a dividend, you have to report it and pay taxes on it right away. But when a company buys back their stock, your wealth increases along with share prices but you don t have any immediate tax obligation. Buyback stocks can act as a safety net. A company that holds a large number of its own shares has a strong incentive to step in and purchase more shares when prices decline.