Glossary

Share buyback

A company buying its own shares, so each remaining share owns more of the business.

In a buyback (or share repurchase) a company uses cash to buy its own shares on the market and usually cancels them. Each remaining share then represents a larger slice of the company's profits.

Buybacks return cash to shareholders without a dividend. They add value when the shares are bought below what the business is worth, and destroy it when the company overpays or borrows to fund them.

A buyback that only offsets shares issued to employees does not shrink the share count.

  • Share dilution: A fall in each shareholder's slice of a company when it issues new shares.
  • Dividend yield: The dividends a share paid over a year, divided by its current price.

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