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A share buyback is when a company purchases its own shares and in doing so increases the market value of the shares by reducing the supply of shares available in the market.

Share buybacks can happen because a company believes its value is greater than its share price indicates, essentially a company may feel it is under-valued by the market.

Some companies may also buyback shares each year as an alternative to increasing the dividend. The advantage of this is that it does not tie the company into a policy to sustain an increased dividend.