Companies have a number of options for providing their shareholders with a profit from the business. While most investors focus on dividends, or cash payments from the business, many companies have embraced share buybacks as well.

The biggest reason is that it’s a more tax-efficient way to boost shareholder returns relative to dividend payments. Companies can buy back shares with their post-tax profits, whereas dividends are taxed as earnings and then again by shareholders.

Share buybacks also allow companies to improve their earnings per share by reducing their share count, without reducing earnings.