When/Why would a firm decide to choose one over the others with excess cash? I understand that debt reduction would probably be vilified in periods of low borrowing costs and that firms may resort to dividends/share buybacks in periods of low rates + low growth (to distribute capital back to shareholders), but when would buybacks be favoured over dividends and vice versa?
All advice is greatly appreciated!
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You missed one more - capex. Remember excess cash can generally be used towards three major categories of corporate activities - 1. capex, expansionary to be more specific, to fund growth, 2. voluntary debt pay-down, and 3. distribution to shareholders incl. buybacks and/or dividends. Aside from the technical aspect of, e.g. some debt instrument (in particular senior secured debt) requiring application of excess cash for debt repayment as part of the financial covenant, you can easily see, based on the three purposes, the application of excess cash is fundamentally driven by how to create value for the enterprise: for instance, expansionary capex to fund revenue/profit growth, debt payment to reduce interest expense/net debt (hence equity value, think about LBO), and distribution to shareholders (to the extent allowed) as a stance for shareholder friendliness which may result in growth in EPS, multiple expansion, etc.
In short, no right or wrong answer, or superiority of one option over the other.