How do stock buybacks compare to dividends as a way companies return cash?

Companies return profits to shareholders in two main ways: paying dividends or buying back their own shares. A dividend puts cash directly in your account, which is tangible but immediately taxable in a taxable account. A buyback reduces the number of shares outstanding, so each remaining share represents a slightly larger slice of the company, which can lift the share price over time and defers taxes until you sell. Neither is inherently better; both are just cash coming back to owners. Index-fund investors automatically own companies doing both, so you don't need to choose. Be a little skeptical of companies borrowing heavily to buy back stock or doing it at inflated prices, but overall buybacks and dividends are two sides of the same coin: returning value to shareholders.