Key Points
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Dividends reward holding and signal discipline, but buybacks drive compounding by raising each share’s claim on earnings.
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Williams-Sonoma, Booking Holdings, and Visa each raised their dividends by 9% to 16% this year while retiring stock at a far larger scale.
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A growing dividend is the signal that management has the discipline to keep buying when the stock is cheap and stop when it isn’t.
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Apple has raised its dividend every year since it brought the payout back in 2012, and almost nobody owns the stock for that reason. The yield has rarely topped 1%.
What Apple has done instead is spend hundreds of billions of dollars buying its own shares, shrinking the count by roughly 40% over that stretch. Every remaining share owns a bigger slice of the iPhone business than it did a decade ago, and that is where most of the compounding came from.
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The dividend was the handshake. The buyback was the deal. Companies that get this split right tend to make patient shareholders a lot of money without ever showing up on a high-yield screen.
How to think about dividends versus buybacks
A dividend is cash in your pocket, taxed the year you get it, and a public promise that is painful to break. A buyback is cash spent on your behalf to retire shares, which raises your ownership stake and per-share earnings without a tax bill until you sell. Dividends reward you for holding. Buybacks reward you for holding longer.
The catch is that buybacks only create value when the stock is bought below what the business is worth, and plenty of companies buy high and stop low. The best capital return programs pair a modest, growing dividend that signals discipline with buybacks large enough to shrink the share count every single year. Three companies, two consumer and one in payments, do this about as well as anyone.
1. Williams-Sonoma: a 15% raise and a share count that keeps shrinking
Williams-Sonoma (NYSE: WSM), the parent of Pottery Barn and West Elm, raised its quarterly dividend 15% in March to $0.76 per share. The yield is only about 1.2% at a $258 stock price, but that understates what shareholders receive. The company repurchased $288 million of stock in the first half of the year and still has about $1.1 billion of authorization left, against a market value near $30 billion.
What makes this work is the business underneath. Comparable sales rose 6.2% in the second quarter, every brand grew, and the company raised its full-year outlook. Williams-Sonoma earns operating margins above 17%, far higher than most retailers, and uses that cash to buy back shares in good years and bad.
For a home-goods retailer in a slow housing market, growing the dividend 15% while retiring stock is a statement about how durable management thinks the profits are.
2. Booking Holdings: a new dividend on top of an old buyback machine
Booking Holdings (NASDAQ: BKNG) only started paying a dividend in 2024, andit has raised it twice already, by 10% in 2025 and 9% in 2026. The payout ratio is under 20%, which leaves enormous room to keep raising it. But the dividend is the side dish. In the third quarter alone Booking bought back $2.1 billion of stock, and it has $12.4 billion of authorization remaining, which is more than a tenth of the company at today’s price.
The stock has fallen about a third over the past year on fears that AI travel agents will cut out the middleman, and that is exactly when a buyback does its best work, per CNBC. Room nights grew 7% and gross bookings 10% in the quarter, adjusted earnings per share rose 17%, and the company is retiring shares at about 16 times earnings. If the AI fear is overdone, every dollar spent now buys more of the recovery.
3. Visa: 16% more dividend and $25 billion returned
Visa (NYSE: V) raised its quarterly dividend 16% to $0.78 in October, and it returned $25.6 billion to shareholders through buybacks and dividends in fiscal 2026 on $46 billion of revenue. Visa has retired roughly a fifth of its shares over the past decade while growing revenue in nine of the past ten years.
The reason to own it is that the buyback is funded by one of the best business models in the world: a toll on a growing share of global spending, with net margins above 50%. A company like that does not need to pay you much in cash. It needs to keep the share count falling, and it does.
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Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Booking Holdings, Visa, and Williams-Sonoma. The Motley Fool has a disclosure policy.
