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.