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The Dividend Investor: A practical guide to building a share portfolio designed to maximise income by Rodney Hobson

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Chapter 13. Share Buybacks

There are sometimes situations where prospects can look superficially tempting for dividend investors but caution is required. The opposite is true of share buybacks, which at first sight seem to act against the interests of dividend investors but which should by no means be dismissed out of hand.

Companies that announce share buyback programmes can look attractive because:

  1. They are making substantial profits.
  2. They are generating piles of cash.
  3. They have so much money piled up in reserves that the directors don’t know what to do with it all.
  4. The directors prefer to return cash to shareholders rather than squander it.

However, handing money to the shareholders by buying back shares is counter intuitive ...

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