'Buyback Boondoggle?' -- Matthew Hougan's blog at Index Universe

I've blogged on this a few times. See, I'm not nuts on this.

A quote: “The decline in dividend increases is disturbing, especially in light of continuing moderate earnings growth and the abundance of corporate cash,” [Howard] Silverblatt [senior analyst at Standard & Poor's] said in a statement. “We believe the present wave of corporate buybacks is contributing to the slower pace of dividend growth in 2007."

Hougan's take: "[They] strike me as tantamount to deferred pay raises for corporate employees. Whereas dividends are paid out to current shareholders, buybacks – by reducing the number of shares outstanding – represent payments to both current and future shareholders ... including the holders of vested and unvested stock options."

His bottom line on this: "It seems like a blatant conflict-of-interest for managers – who often hold large options positions – to make decisions about whether to buyback stock or boost dividend payments."


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