Besides dividends, there’s another way to grow your portfolio. Stock buy backs. A stock buyback is when a company buys back some of its own shares.
A buyback doesn’t mean a company will come knocking on your door to buy your shares, it simply means a company will place orders on the stock market and over a period of time buy back some of its own shares from other investors.
What does a share buyback mean for you? A share buyback reduces the amount of outstanding shares on the market. Reduced supply usually results in an increase in the share price for the remaining shares.
Bank of Nova Scotia recently announced that they will buyback 1% of their outstanding shares by the end of May 2015:
“…enable [Bank of Nova Scotia] it to purchase up to 12 million of its Common Shares. This represents approximately one per cent of the 1,216,689,705 Common Shares issued and outstanding as of May 23, 2014. Scotiabank believes that the purchase of its Common Shares at market prices may be an appropriate use of its funds to generate shareholder value, as well as for capital management purposes.”*
So if you own shares in BNS, sit back, relax, and continue to collect dividends, while BNS buys back 12 million of its own shares.
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