Dividends Vs. Buybacks Winners And Losers: Michael Mauboussin

Alongside the growth in investor activism, you may have noticed that a lot of companies are sitting on cash these days. Apple Inc. (NASDAQ:AAPL) and Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) have been two of the higher profile cases, but they’re certainly not the only ones who generating more cash than they want to invest. But even a company does want to return some of that money, it’s not obvious whether buybacks or dividends is better for the company or for shareholders.

Confusion over the benefits between dividends and buybacks

“Executives view the two [dividends and buybacks] very differently and are often unsure of the best way to proceed,”...