Are Stock Buybacks a Good Thing, or Not?

It's hard to argue with Apple's strategy. Shares of the tech giant gained more than 35% over the last year (as of September 2021) as it continues to sell iPhones at scale. However, Apple certainly isn't the norm on Wall Street, and analysts continue to ask the question: Are corporate stock buybacks a good thing?

One of 4 Choices
For corporations with extra cash, there are essentially four choices as to what to do:
1. The firm can make capital expenditures or invest in other ways into their existing business.
2. They can pay cash dividends to the shareholders.
3. They can acquire another company or business unit.
4. They can use the money to repurchase their shares—a stock buyback.

Similar to a dividend, a stock buyback is a way to return capital to shareholders. A dividend is effectively a cash bonus amounting to a percentage of a shareholder's total stock value; however, a stock buyback requires the shareholder to surrender stock to the company to receive cash. Those shares are then pulled out of circulation and taken off the market.