Google today announced that the board has approved $70B of stock buybacks.
Stock buybacks are not considered a universal good: "Some economists and investors argue that using excess cash to buy up stocks in the open market is the opposite of what companies should be doing, which is reinvesting to facilitate growth (as well as job creation and capacity)."
At Google that might mean things like (for example) "Choosing not to fire 12,000 employees."
Dividends are fair: all shareholders get a return proportional to their investment.
Stock buybacks force stockholders to gamble: take the premium now, or hope that the share price will go up as predicted by theory.
This has the perverse effect of distributing the company's past profits to those shareholders who have LESS faith in the company's future profitability.
Thus information asymmetry hits even passive investors, not just traders. And invites insider trading...
Christopher Schmidt
Jorge Stolfi