Understanding Stock Buybacks

Shrink! The Latest Buyback Announcements

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Stock buybacks are seen as a bullish sign that management thinks its stock is cheap. Not only can they get a better return by investing in their company, but it's also a way for companies to return capital to shareholders, just like dividends.

A quick take on buybacks: Done right, repurchasing shares increases earnings per share, assuming that profits at least maintain their present level. A company with $1 million in earnings and 1 million shares outstanding will have EPS of $1.00. Buying back 250,000 shares so that only 750,000 shares remain outstanding -- and total profits are still $1 million -- means EPS will increase 33% to $1.33 (1 million divided by 750,000 is 1.33).

Wells Fargo approves buyback of 75 million shares

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The buyback accounts for about 2.2 percent of the company's 3.4 billion shares outstanding

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