InterDigital Inc (IDCC)

[The Count]

Buyback problems listed don't make sense

I can go into detail if it's important, but the prior post put it very simply and succinctly. If the buyback is at lower levels than the current stock price, then it was a good move. I'll add a caveat - if the buyback caused a cash flow problem that prevented the company from achieving even greater market cap appreciation because of a missed opportunity, then it was not a complete success.

I like buybacks better than dividends because it is like receiving a dividend that is reinvested in the company. If IDCC were to buy back say 5% of its shares, anyone who wants to take a cash dividend can sell 5% of their holdings, receive the cash, pay less tax then they would on a dividend because they have basis in the shares sold, and still own the same relative share of IDCC stock. If someone gets a 5% dividend and they want to reinvest, they have to pay tax on the entire dividend and then buy more stock to maintaining the same investment percentage.

I like dividends because many investors look for dividend paying stocks and a regular dividend can increase the value of the shares because of the yield.

However because management holds so many stock options and RSUs, IDCC is unlikely to go the dividend route. Even though the total return with appreciation + dividend might be greater with a dividend then the appreciation from a buyback, option and RSU holders only participate in the appreciation, so there bias would be to not pay dividends.