If a company pays a dividend, it generally means it is profitable, growing and mature enough to offer a high margin of safety. But share buybacks have the same effect but are more tax-efficient. Every long-term investor should have the same goal: maximum total return after taxes. Minimizing the annual tax imposed on your portfolio is an important goal.
Bear in mind, buybacks are mathematically almost identical to dividends for total shareholder return. In general, a company paying a 4% dividend should return the same as a company paying no dividend but retiring 4% of its outstanding shares. With a buyback, unlike dividends, no money is distributed to shareholders. Therefore, there is no taxable event. Because capital gains tax is not a tax on capital gains. It is a tax on transactions and therefore, if you sell nothing, you owe the IRS nothing.
Sven Franssen