Wal-Mart Stores (WMT) returned $886 million and $1.067 billion on share repurchases and dividends for the latest quarter. The money spent on buybacks translates into 22.50 cents/share for the latest quarter. In comparison, the world’s largest retailer returned $932 million in the form of dividends and zero in the form of stock buybacks in the previous quarter. Most recently it announced a new share repurchase program that gives the company authorization to repurchase $15 billion of its shares. Wal-Mart (WMT) has increased its quarterly dividend in each of the past thirty-five years, with its most recent dividend payment being 27.3 cents/share. Check my analysis of WMT.

Overall, the money spent on stock buybacks, does increase earnings per share in the long run, which also leaves room for faster dividend growth. This could also lower total dividend costs paid by corporations down the road.

In the end I enjoy a balanced approach, where companies do both dividends and share buybacks. My preference is on dividends, as I view share buybacks as a way to share the wealth with shareholders only during good times. The recent Standard and Poors report shows the steep declines in share repurchases in the first quarter of 2009. This confirms my theory that stock buybacks are similar to special dividends, and should not be taken into consideration when evaluating the income attractiveness of dividend stocks. However while both methods have their pros and cons, when used carefully, they could strongly add to the total returns of long-term shareholders.