The fact is that there are some companies that do both.  Apple, Microsoft, and Cisco Systems are three examples of companies that pair dividends with stock buybacks. However, these are blue-chip companies that have large market capitalizations. Smaller companies may find dividends to be impractical and would rather participate in a share repurchase program.
Both a stock buyback and issuing a dividend are ways of returning capital to shareholders. Dividends are issued out of a company’s residual earnings either quarterly, semi-annually, or annually. A dividend does not directly affect a company’s market capitalization, although companies that issue dividends may see a short-term increase in its stock price as income-oriented investors try to capture the dividend.
By contrast, stock buybacks reduce the number of the company’s outstanding shares which will directly affect its market capitalization. Although a company can see the value of its stock increase with the declaration of a stock buyback, its market cap will go down. However, its earnings per share will increase, which can be an indirect motivation for companies to announce a buyback to begin with.