Choice in the matter they are issued the dividend and

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choice in the matter they are issued the dividend and you most pay that tax which could be 20 percent or more in some cases. The repurchase also could raise the stock price by buying stock it is limiting the amount that is out for the public to purchase and would most likely increase the value of the stock that is still on the market. Management does not like to raise dividends and are less likely to low dividends because it gives a sign that the firm could be in financial trouble but with a stock repurchase it would be able to sell the repurchased stock if it ever need to raise capital for future projects. Firms sometimes find that its capital structure is to low and they would need to return it to an optimal level. If the company borrowed money then used that money for the stock repurchase it would increase its debt ratio but also increase stockholders wealth. Stock repurchase are also a great way of creating an employee compensation plan. If employees have stock options in their contacts and they use them then the firm would have to issue new stock to compensate them which would dilute the earnings per share of all the stocks but with the repurchased stocks you could reissue those to the employees and still keep earnings per share at a high level. The disadvantages of a stock repurchase is that some stockholders to not want it. If a majority of the stockholders favor a dividend policy a stock repurchase would not be in their best interest and would prefer a bigger dividend. The selling stockholders might not know all the information such as management does not think that the stock is selling at a high enough level and would leave ex-stockholders might fill suit. The firm might pay to high of a price for the repurchased stock and would lead to further debt by the firm. If the firm pays a high price for the stock then it would be less than they should and it could lead to an overvaluation of the stock a whole which would not be in the best interest of the current stock holders.
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