This page covers how the stock market works for Canadian investors. The section below covers stock buybacks.
Stock buybacks
A stock buyback (share repurchase) is a company buying its own shares back from the market. This page explains how buybacks work in Canada, what they do to earnings per share and the share price, how they compare with dividends, and how they are taxed for shareholders. Every other guide in this section is listed in the Canadian stocks hub.
How a Stock Buyback Works
- Company announces a share repurchase program (e.g., “We will buy back up to $1 billion in shares over the next 12 months”)
- Company buys its own shares on the open market at market price. If you sell your shares on the exchange during a buyback, the sale is taxed like any other sale of shares (see the capital gains calculator).
- Purchased shares are cancelled (retired), reducing shares outstanding
- Remaining shareholders each own a slightly larger percentage of the company
Impact on Key Metrics
| Metric | Before Buyback | After Buyback | Effect |
|---|---|---|---|
| Shares outstanding | 100 million | 95 million | ↓ 5% |
| Net income | $500 million | $500 million | No change |
| Earnings per share (EPS) | $5.00 | $5.26 | ↑ 5.3% |
| Your ownership | 0.001% | 0.00105% | ↑ 5.3% |
Buybacks vs Dividends
| Factor | Stock Buyback | Dividend |
|---|---|---|
| Cash to shareholders | Indirectly (higher share price) | Directly (cash payment) |
| Tax (non-registered) | No immediate tax if you hold | Taxed as dividend income |
| Tax (TFSA/RRSP) | No difference | No difference |
| Shareholder choice | No action needed; it happens automatically | Receive cash, decide what to do |
| Flexibility for company | Can start/stop easily | Cutting dividends signals trouble |
| Signal to market | “Shares are undervalued” | “We generate stable cash flow” |
Canadian Companies That Do Buybacks
Canadian companies buy back shares through a normal course issuer bid (NCIB), a program accepted by the Toronto Stock Exchange that sets the most shares the company may buy over 12 months. The maximum is a ceiling, not a commitment: a company may buy fewer shares or none. Figures below are from each company’s own announcement of its current bid.
Big Banks
Bank buybacks also need the approval of the banking regulator (OSFI).
| Bank | Current NCIB: up to | Bid ends | Previous bid |
|---|---|---|---|
| Royal Bank (RY) | 45 million shares | June 11, 2027 | 19.2 million shares at about $215.85 (about $4.1 billion) |
| TD Bank (TD) | $7 billion, and no more than 61 million shares | January 15, 2027 | |
| BMO (BMO) | 25 million shares | September 7, 2027 | 23.7 million shares at about $197.76 (about $4.7 billion) |
| Scotiabank (BNS) | 15 million shares | April 6, 2027 | 20 million shares for $1.8 billion |
Energy
| Company | Current NCIB: up to | Bid ends | Previous bid |
|---|---|---|---|
| Canadian Natural Resources (CNQ) | 182.4 million shares | March 12, 2027 | |
| Suncor (SU) | 118.7 million shares | March 2, 2027 | 54.2 million shares for about $3.1 billion |
| Cenovus (CVE) | 120.3 million shares | November 10, 2026 | 82.6 million shares at about $21.58 (about $1.8 billion) |
Each of the three oil producers set its bid at about 10% of its public float, the TSX limit described below.
Technology
CGI (GIB.A) has an NCIB for up to 19.0 million Class A shares, running to February 5, 2027; in the nine months to June 30, 2026 it bought 12.5 million shares for about $1.4 billion. It also pays a quarterly dividend ($0.17 a share in 2026), so it returns cash both ways.
How Buybacks Are Regulated in Canada
| Rule | Description |
|---|---|
| Normal Course Issuer Bid (NCIB) | Purchases over 12 months may not exceed the greater of 10% of the public float or 5% of the shares issued and outstanding |
| TSX acceptance required | The company files a notice of intention, and purchases can start only after the TSX accepts it |
| Daily volume limits | Purchases on any trading day may not exceed the greater of 25% of the average daily trading volume or 1,000 shares, except for 1 block purchase a week |
| Duration | A bid runs for up to 12 months and can be renewed with a new notice |
Source: Toronto Stock Exchange Rule Book, Rule 6-101 (definition of “normal course issuer bid”).
When Buybacks Create and Destroy Value
| Scenario | Outcome |
|---|---|
| Company buys below intrinsic value | Creates value; remaining shareholders benefit |
| Company buys at fair value | Neutral; similar in effect to paying a dividend |
| Company buys at overvalued price | Destroys value; it overpays for the shares |
| Company uses debt for buybacks | Increases leverage and risk |
| Company has better investment opportunities | The cash could have earned more invested in the business |
Tax Implications for Canadian Investors
| Account | Impact of Buyback |
|---|---|
| TFSA | No tax impact. Share value increases tax-free |
| RRSP | No tax impact. Grows tax-deferred |
| Non-registered (holding) | No immediate tax if you don’t sell |
| Non-registered (selling) | Selling on the exchange during an NCIB is an ordinary sale (capital gain or loss); shares bought back directly by the company can give a deemed dividend on the amount above paid-up capital |
| Compared to dividend | Buybacks defer tax until you sell, dividends are taxed immediately |
How to Evaluate Buyback Programs
| Signal | Good Sign | Bad Sign |
|---|---|---|
| Valuation | Buying when P/E is low relative to history | Buying at all-time highs just to boost EPS |
| Cash position | Buying from excess cash flow | Borrowing to fund buybacks |
| Alternatives | No higher-return investment opportunities | Neglecting R&D or debt repayment |
| Consistency | Steady buyback over market cycles | Aggressive buying only in good times |
| Track record | Shares outstanding declining year over year | Shares barely declining (offset by stock options) |
Canada’s tax on share buybacks
Since January 1, 2024, Canada has charged a 2% tax on repurchases of equity (Part II.2 of the Income Tax Act). The company pays it, not the shareholders who sell. Key details:
| Feature | Details |
|---|---|
| Rate | 2% of the value of equity repurchased in the year, less the value of equity issued from treasury in the year |
| Applies to | Canadian corporations (other than mutual fund corporations), REITs, SIFT trusts and SIFT partnerships whose equity is listed on a designated stock exchange |
| Threshold | No tax for a year in which the company repurchases less than $1 million of equity |
| Effective date | Repurchases on or after January 1, 2024 |
| Similar to | US 1% excise tax on buybacks (Inflation Reduction Act, 2022), in effect since 2023 |
The tax was announced in the 2022 Fall Economic Statement, which said it was aimed at encouraging corporations to reinvest their profits in their workers and businesses.