I found this question particularly helpful:Are stock buybacks similar to dividends?
Not too far off from this angle, my textbook has this as an introduction to stock buybacks:
Share repurchases are an alternative to cash dividends as a way of distributing cash to shareholders, and they have the same effect on shareholders' wealth as cash dividends of the same size.
Both sources also make not of the differences in tax efficiency too. This much I get.
However, it's perhaps this whole notion of "same effect on shareholders' wealth" that I'm taking objection too. Namely, the glaring difference here, unless I'm missing something, is paper versus realized wealth. Dividends are cash out, reducing shareholder value, but giving the shareholder a realized cash flow. Meanwhile, share buybacks increase the share price but its only on paper. Not to labor the point, but suppose the buyback shortly preceded an index-wide downturn. That's essentially what I'm trying to probe for. The utility of realized gains to some investors seems to be missing from the discussions and textbook comparisons of dividends versus buybacks.
Why isn't the realized versus paper dimension brought up during these comparisons? Or am I totally missing the point on something?