When investors look for some of the best indicators pointing to a stock moving higher in the short—to medium-term timeline, there aren’t many indicators as powerful as a company buying back its own stock in bulk. Stock buyback programs are a tax-free and efficient way to reward shareholders, unlike dividend payments or other methods commonly used in today’s market.
The primary benefit of buying back stock is that it increases the percentage ownership of all existing shareholders, without requiring any additional capital expenditure. The second effect is that the available number of shares also declines, which helps boost future earnings per share (EPS) figures.
