This was exactly the question asked by our fin prof in class today...
Our fin class today was around Dividends vs. Repurchasing. The prof was describing when to announce dividends vs. repurchasing shares and what they signal to the market. Dividends signal to the market that the firm expects to have sustainable high earning even in the future. On the other hand, repurchasing stocks is a 1 time transaction that signals that you may undervalue your company.
He proceeds to say that dividends is much more of a long-term commitment. I like to think of it as a marriage.
1 student unable to contain himself laughs out loud. To which, the professor remarks that well most people would consider marriage as a long-term commitment. The student continues to smile and hold back his laughter.
The prof next says, "if we go with the assumption that dividends is like marriage, then what's repurchasing shares?"
The same student wittingly replies, "a 1 night stand!"
To this the prof remarks that last class an eager female student said that it's an affair... this guy (pointing at the student) is even worse. Saying to the rest of class, prof says, "come on guys, get with the program." Lol!
P.S. I also found out that Nandita Das and Rahul Bose are here. I hope I can see them and take a pic with them. That would be super cool!