By-backs by management of stock is one way to bribe (short-term) investors to put up with bad management.
Why not have a law preventing it? Applicable to any transportation and utility company?
Not necessarily so, unless you consider dividend payments to be of a similar nature. Stock buybacks of various sorts have tended to replace dividends as a way of rewarding the shareholders. Such a statute may also have a difficult time getting through Congress.
Dave,
Your premise is false, as is any action that might flow from it.
CSSHEGEWISCHNot necessarily so, unless you consider dividend payments to be of a similar nature. Stock buybacks of various sorts have tended to replace dividends as a way of rewarding the shareholders. Such a statute may also have a difficult time getting through Congress.
As the inhabitants of Congress tend to thrive from 'Insider Trading'. Show me a member of Congress that leaves office financially equal or less than when they entered Congress and you have found a 'open and above board' Congressman.
Never too old to have a happy childhood!
Stock buybacks are usually a good thing as that action represents a show of confidence in the future prospects of the company. I say "usually" because a buyback can also be used to falsely indicate that the company is doing well. But investors who actually read the reports can generally see for themselves what's going on. Same with dividends.. a company can pay dividends to falsely assure investors that all is well... but for the most part dividends are simply nothing more than passing some profit on to shareholders. Generally any legal action to bolster the price of the stock (without undermining the business in the process) is a good thing.. Buybacks mean fewer shares in circulation which means each share becomes worth more. A good thing as we investors own the business after all.
Probably banning stock buy-backs would be illegal. Along with the good is the false impression made by raising the EPS, which could fool some potential investors.
Investors do regard them as a good thing, but the money is diverted from taxable dividends, maintenance, greater effucuebcy, and capacity expansion. And the complaints are that service has suffered and business lost by managements' over-priorizing immediate investor profits.
Common carriers and utilities function by charter from governments at various levels, thus laws regulating them are possible without violating private property rights. Emenant domain was used in their creation.
daveklepper Eminant domain was used in their creation.
In the case of the railroads, at least in the east, nothing could be further from the truth. Early railroads either purchased the land outright or negotiated a long-term agreement with the landowners.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
One rather nice byproduct of a low OR is that railroads can spend on improvements and have enough left over to buy back shares. And the shares they buy back are shares they nolonger pay dividends on, so there are some savings there too. Let's say we have 1000 shares outstanding.. each quarter we pay $.50 per share on dividends.. so $500.00 per quarter, or $2000.00 per year. We buy back 100 shares.. we now have 900 shares outstanding.. and notwithstanding any dividend increases, our dividend spend becomes $450.00 per quarter or $1800.00 per year.
daveklepper By-backs by management of stock is one way to bribe (short-term) investors to put up with bad management. Why not have a law preventing it? Applicable to any transportation and utility company?
The management isn't necessarily bad. They are only doing what the owners want. Usually what the activist and/or short term portion of owners want. Buy backs are a quick way to return money to those people.
Just because you might borrow a billion or two to finance it is nothing to worry about. Interest rates are low, the debt is tax deductible, and it's not like they're losing revenue even though volumes are declining. The gravy train will just keep rolling on.
Jeff
Because of some takeovers by vulture capitalists, some of you overrate the power of stockholders. Management routinely write themselves huge compensation packages and golden parachutes for incompetence.
tree68 daveklepper Eminant domain was used in their creation. In the case of the railroads, at least in the east, nothing could be further from the truth. Early railroads either purchased the land outright or negotiated a long-term agreement with the landowners.
I not so sure about that.
Honestly I can't give you chapter and verse as to where I read it and when I read it, but there were some instances in the 19th Century where some railroads prevailed on state governments to invoke eminent domain to get the 'roads built.
Definately more the exception than the rule, the usual reason was hard-headed landowners who refused to sell, or asked outrageous prices for the property. Since the railroads were considered a new technology that the country had to have the state governments were prevailed upon to intervene and typically did so.
Not a proper use of eminent domain, I'll admit, but they felt they had no other choice.
Again, more the exception than the rule. Most farmers, who typically didn't have two nickles to rub together, or had to bust their butts for what they did have, where more than happy to take the railroads hard cash.
Flintlock76Honestly I can't give you chapter and verse as to where I read it and when I read it, but there were some instances in the 19th Century where where some railroads prevailed on state governments to invoke eminent domain to get the 'roads built.
I wouldn't be surprised. I was thinking more in the terms of land grant railroads.
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