So I've been diving in more to understanding the intrinsic value of shares, and I've landed on this question. If there is any literature you recommend please direct me. Currently working my way through the Intelligent Investor.
Alright, so I understand that buybacks are more tax efficient and that when they are done value-accretive it is beneficial to the remaining shareholders because they now own a larger % of the company and more EPS, thus their stake is worth more.
But, at the end of the day, owning a larger % of the company only matters if that value can be realized. And saying that you realize the value of the share of the company by selling it, is circular reasoning. It doesn't make sense that you only buy it for the sake of selling it. There must be some intrinsic value to owning the share itself, otherwise it's just a Ponzi Scheme. At some point one of the people buying your share are going to want to actually get cash flow from that share without having to sell it.
And I understand that if you own a higher % of the company, then you will have a greater payout if the company is acquired...but this isn't as realistic an outcome for big low or non-dividend companies like BRK.B, AAPL, GOOG, etc.
Fundamentally, if the companies never pay dividends that are proportional to the price investors pay to be a shareholder, then there is no reason to buy a share in the company.
Aside from PE, would people buy into a small business if the only way anyone could ever extract value from the business was by selling it? Probably not, because then what would be the point in owning?
So if AAPL stock is $200/share and I want to be a shareholder, then realistically, I should expect that the dividends from the company will eventually cover the cost of my purchase. I am not worried about capital gains, because I want to keep the shares.