regular cash dividend

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Compare a regular cash dividend with a periodic share repurchase. Which has greater appeal? Explain.

Comparing a regular cash dividend with a periodic share repurchase requires a deep understanding of each term. Regular cash dividends are dividends paid to company's shareholders in cash. The amount of dividends, as a rule, is based on the profit and income under taxation. The distributed cash can include the growth of capital and capital profit in addition to the dividends. Share repurchase is a program, in accordance with which a company ransoms its own stocks on the open market. The company usually resorts to share repurchase when its stocks are undervalued. Share repurchase decreases the quantity of stocks that already are in the market, increases the income from the stocks and raises the market value of papers that remain with the stockholders of the company. To own economically stable stocks of a high price - is always connected with certain advantages. And if it goes about major shareholders it is the perfect way for them. But from the ordinary consumers point of view regular cash dividend may have some advantages over the periodic share repurchase. In the first place because shareholders get "live money" and can feel the profit in their own hands.

Therefore this form of getting dividends can be more appealing to a certain group of shareholders that are looking for instant profit. Nevertheless an objective look of a share trader shows that share repurchase is better in the long run.

source: http://ezinearticles.com/?Dividend-Rich-Investor&id=325689

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