Buybacks are driven solely by a desire to appease shareholders by increasing earnings per share in a seemingly risk-averse manner. However, buybacks tend to only happen when the valuation is already sky high. Only a handful of companies have the discipline to buy back stock when the valuation is low and pursue a secondary when it's high.
Shareholders like buybacks over dividends for tax reasons. You don't pay taxes on a stock's appreciation until you sell it, so the investor chooses when the taxable event occurs.
I'm planning on liquidating most of my investments after I retire and have no wage income, so I save a lot of money when a corporation does buybacks instead of disbursing dividends this year when I'm employed and in a higher tax bracket.
So all the people who make the buyback decisions are paid in stock. It is in their own self interest to buy back as much stock as possible, and inflate the per share price, right?
