THINKING ALOUD

Buybacks vs dividends: Which is better for shareholders?

Companies with surplus cash should weigh which creates most value for investors

Summarise
    • Dividends distribute cash proportionately to all shareholders, while a buyback pays cash only to those who sell.
    • Dividends distribute cash proportionately to all shareholders, while a buyback pays cash only to those who sell. PHOTO: TAY CHU YI, BT
    Published Wed, Oct 21, 2026 · 07:00 AM

    AT A recent Singapore Institute of Directors event, participants suggested that companies that have no better use for their excess capital should consider buying back their own shares.

    This is an increasingly popular recommendation, and many companies have responded over the past few years by introducing buyback schemes. But is it necessarily best for shareholders?

    The conventional argument for buybacks appears to be straightforward.