Discussion:
Review the posts of your peers, and respond to at least two. For each response, address any discrepancies between your findings and your peer's. Seek clarification of any aspects of the post that are not clear to you. Provide feedback on any particular topics that could be clarified.
Student 1
As an investor, I would look at the statement of cash flows on the balance sheet. If it looks a company has an excess in cash then they can use that money to reinvest in itself to buy back shares of its own stock. Redistributing the wealth within the company is viewed as a positive by investors as well as a creating a tax advantage.
Since President Trump signed the tax bill, there have been companies that have announced about $170.8 billions in stock buybacks. The corporate tax rate went from 35% to 21%. Cisco for example had approximately $68 billion overseas and are going to take $25 billion to buy back stock.
Reference: Boom in Share Buybacks Renews Question of Who Wins From Tax Cuts By Akane Otani, Richard Rubin and Theo Francis
Student 2
As an investor it is very important to review and understand a company and its recent transactions. To determine if a company has repurchased any of its own stock and/or issued stock dividends during the current period I would first look at the company's income statement for the past few years. The income state will report the company's financial performance of cash flowing in and out of the company. Furthermore, I would also pay close attention to the company's statement of cash flows. The statement of cash flows will show how much cash a company has generated and how much cash was used by the company. Accordingly, I would also pay close attention the statement of cash flows financing activities. The financing activities section will include information such as new debt and dividends paid to investors.
Moreover, as a publicly traded company, I would pay close attention to the marketplace. I would be able to analyze trends such as company buyback or share repurchase by the company. There will always be some risk in investing into a company as we never really know what will happen in the future. However, analyzing the market and the companies' trend while comparing can give investors a good idea of where the company will go.
Lastly, as stated by the Wall Street Journal, U.S. companies are currently buying back share at increasingly fast and record breaking pace. This has provided support to the stock market by driving the number of available shares down and raising the cost of a single share. At the same time this is also giving large companies the support and benefit of having the ability to later on sell those shares for additional cash flow.
Reference:
Eisen, B., &Otani, A. (2018, May 10). Record Buybacks Help Steady Wobbly Market. The Wall Street Journal.