Summary Share repurchase programs are best done when they complement rather than compete with dividends. Buying back stock is like buying any other asset. Calculating a return on the cost is a useful metric for judging the impact to shareholder value. A buyback program should be reviewed in the context of spending alternatives and the impact to the capital structure. I’ve read many insights about the appropriateness of buyback programs over the years. Many rightfully argue that corporations are propping up earnings per share by reducing share count. Dividend investors argue that buybacks should be eliminated with excess cash returned in the form of higher dividend payments. An excellent blog published by NYU professor Aswath Damodaran reviews capital allocation options at various growth stages of a business. Linking the generation of free cash flow to cycle maturity and growth investment opportunities can be seen in his graphic below.  Logically a company having excess accumulated and generated cash flows has a duty to deploy it to the benefit of owners. The deployment choice is an interesting one, but the decision to invest internally is beyond the scope of this article. Instead, this article will explore the effectiveness of the decision to return cash to shareholders by looking at three companies: #IBM (IBM), #Intel ( #INTC ) and #Microsoft ( #MSFT ). These companies were chosen because they have similar attributes. All three are mature and trying to reaccelerate growth in the cloud and Internet of Things. The decision to focus on technology is consistent with FactSet reporting that IT is the buyback leader.  It’s also worth noting that FactSet reports the total amount of buybacks has started to decline recently after a lengthy upward trajectory.
https://seekingalpha.com/article/4102062-capital-allocation-review-dividends-buybacks-ibm-intel-microsoft
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