Buyback or Dividends

The strategically relevant components of the global and U.S. beverage industry macro-environment:

* Global beverage companies such as Coca Cola and PepsiCo had relied on such beverages to sustain in volume growth in mature markets where consumers were reducing their consumption of carbonated soft drinks.

* Coca-Cola, PepsiCo, and other beverage companies were intent on expanding the market for alternative beverages by introducing energy drinks, sports drinks, and vitamin drinks in more and more emerging international markets.

* Beverage producers had made various attempts at increasing the size of the market for alternative beverages by extending existing product lines and developing altogether new products.

* Expanding the market for alternatives beverages and increasing sales and market share, beverage producers also were forced to content with criticism from some that energy drinks, energy shots, and relaxation drinks presented health risks for consumers and that some producers' strategies promoted reckless behavior, the primary concern of most producers of energy drinks, sports drinks, and vitamin-enhanced beverages was how to best improve their competitive standing in the market place.

* Rapid growth in the category, coupled with premium prices and high profit margins made alternative

Dividends vs Buybacks

Firms have numerous ways through which they share their wealth with shareholders. Dividends are the portion of business profits paid out to stockholders in the form of cash. On the other hand, share or stock buybacks represent cash distributed to existing shareholders in exchange for a portion of the company's outstanding equity.

Share buybacks are often a preferred method for returning cash to shareholders. Investors like share buybacks because they support higher stock prices and one can choose the timing of share sale and tax consequences at a point in the future. So, buybacks are normally more flexible for the company. Share buyback lets one defer taxes because one is not taxed on his gains until one sells his shares. Also, in a share buyback plan, the company buys back outstanding shares from its stockholders. As a results, it decrease the number of outstanding shares available on the market and increases the earnings per share, due to the lower number of available shares.

On the contrary, dividends are taxed at time of distributions and the investors have no choice for when they receive the dividends. Dividends are more flexible and beneficial for the shareholder. Dividends are mostly cash in hand. Therefore, it gives the investors options about their further distribution. They could be spent, re-invested in the same or other stocks or could be placed in a savings account. So, dividends are more predictable and reliable sources of income.

Moreover, firms that