Stock Repurchase

Stock repurchase is a special type of dividend. If there were no separate tax treatments between ordinary income and capital gains, and if a proportionate number of the shares were acquired from all stockholders, the economic effects would be almost identical for stock repurchase as for a cash dividend. If the stock is not acquired proportionately from all investors, stock repurchase is a special type of dividend, since it goes only to the stockholders who prefer cash compared to increased ownership.