Firms use cash flow primarily to finance increasingly persistent share repurchases. Such internal financing is accompanied by gradual increases in retained earnings in the capital structure, and results in high (low) repurchase (investment) sensitivity to cash flow. These effects are particularly pronounced among financially mature firms. The repurchase–cash flow sensitivity of U.S. firms has increased steadily in recent decades, with steeper increases for financially mature firms. We find that repurchases are not generally associated with underinvestment. Moreover, a non-trivial number of firms would have depleted their retained earnings if they paid dividends instead of repurchased shares.