Dividends and Dividend Policy. Dividend Definitions (Cash) Net Income Regular Cash Dividend Extra Dividend Special Dividend Asset SalesLiquidating Dividend.

Slides:

Advertisements

Similar presentations

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Dividends and Dividend Policy Chapter Eighteen.

Advertisements

Capital Structure Debt versus Equity. Advantages of Debt Interest is tax deductible (lowers the effective cost of debt) Debt-holders are limited to a.

Chapter 13. Dividend Policy and Internal Financing.

Chapter 7 Dividend Policy Meaning of Dividend Dividend refers to the business concerns net profits distributed among the shareholders. It may also be termed.

Classes-To-Go! 2B Dividends Matter! Shanna Rendon.

Dividend Policy: Theory

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Dividends and Dividend Policy Chapter Seventeen.

17-0 Does Dividend Policy Matter? 17.2 Dividends matter – the value of the stock is based on the present value of expected future dividends Dividend policy.

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Dividends and Dividend Policy Chapter 14.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Dividends and Dividend Policy Chapter Seventeen Prepared by Anne Inglis, Ryerson University.

Chapter 17 Dividends and Dividend Policy McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 0 Chapter 14 Dividends and Dividend Policy.

Dividends, Dividend Policy and Stock Splits Understand the formal process for paying dividends and differentiate between the most common types.

McGraw-Hill/Irwin ©2001 The McGraw-Hill Companies All Rights Reserved 14.0 Chapter 14 Dividends and Dividend Policy.

Chapter Outline Cash Dividends and Dividend Payment

DIVIDENDS AND DIVIDEND POLICY Chapter 17. Dividend: cash paid out of earnings Distribution: cash payment from sources other than earnings Cash Dividends.

Dividends and Payout Policy

Dividend Policy 05/30/07 Ch. 21. Dividend Process Declaration Date – Board declares the dividend and it becomes a liability of the firm Ex-dividend Date.

Dividend Policy and Retained Earnings (Chapter 18) Optimal Dividend Policy Conflicting Theories Other Dividend Policy Issues Residual Dividend Theory Stable.

Dividend Policy “I tell you Wellington is a bad general, the English are bad soldiers: We will settle the matter by lunch time” –Napolean Bonaparte Waterloo,

14-1 Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

Dividend Policy. Contents Introduction Influencing factors Dividend Distribution Theories – Walter Model Gordon Model Modigliani Miller Model Stability.

Chapter 10 Dividend Policy © 2005 Thomson/South-Western.

Chapter 15 Dividend Policy Professor XXXXX Course Name / # © 2007 Thomson South-Western.

Dividend Policy Overview Practical Aspects Practical Aspects Benchmarking: Irrelevance revisited Benchmarking: Irrelevance revisited Policy Policy.

Ch 17 Dividends and Payout Policy

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved 1 Chapter 17 Sharing Firm Wealth: Dividends, Share Repurchases, and Other Payouts.

© 2004 by Nelson, a division of Thomson Canada Limited Contemporary Financial Management Chapter 14: Dividend Policy.

15 Dividend Policy ©2006 Thomson/South-Western. 2 Introduction This chapter examines the factors that influence a company’s choice of dividend policy.

1 Today Financing decisions Financing patterns and stock market reaction Payout policy Reading Brealey and Myers, Chapter 16, 17.

Payout Policy 1Finance - Pedro Barroso. Different Types of Dividends Many companies pay a regular cash dividend – Public companies often pay quarterly.

CORPORATE FINANCIAL THEORY Lecture 6. Review Goal: M aximize Value of the Firm Past Topics Investment Decision (spending money) Financing Decision (raising.

V Unit DIVIDEND THEORIES Dividend decision determines the amount of earnings to be distributed to share holders and the amount to be retained in the firm.

Dividends and Dividend Policy

Corporate Taxes Value of the firm and WACC

Corporate Investment and Shareholder Wealth. Why do positive NPV investments lead to increases in share price?

Dividends and Dividend Policy!

Weighted Average Cost of Capital The market value of the firm is the present value of the cash flows generated by the firm’s assets: The cash flows generated.

Chapter McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. 18 Dividends and Dividend Policy.

Drake DRAKE UNIVERSITY MBA Stock Valuation A Discounted Cash Flow Approach.

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. 18 Dividends and Dividend Policy.

Types of distributions Cash dividends Repurchases Stock dividends Stock splits 1.

Chapter 17 Dividends and Dividend Policy 17.1Cash Dividends and Dividend Payment 17.2Does Dividend Policy Matter? 17.3Real-World Factors Favoring a Low.

SOURCES OF FUNDS: 1- retained earnings used from the company to the shareholders as dividends or for reinvestment 2- Borrowing, this tool has tax advantages.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

© Prentice Hall, Chapter 15 Dividend Policy Shapiro and Balbirer: Modern Corporate Finance: A Multidisciplinary Approach to Value Creation Graphics.

Dividend Policy. Should the firm pay out money to its shareholders? Source of capital: debt, preferred stocks, common stocks, and retained earnings. If.

© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Dividends and Dividend Policy Chapter Eighteen.

DIVIDEND THEORY CHAPTER 17. LEARNING OBJECTIVES  Highlight the issues of dividend policy  Critically evaluate why some experts feel that dividend policy.

Chapter 14 Dividend Policy © 2001 South-Western College Publishing.

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved CHAPTER 18 Dividends and Other Payouts.

1 Dividend Policy - Basics by Binam Ghimire. Learning Objectives  Forms of Dividend  Dividend Payment Chronology  Factors affecting Dividend Payment.

CHAPTER 17 DIVIDEND POLICY.

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 7 Equity: Preferred and Common Stock. Investing in Stock Acquiring ownership (equity) in a corporation Residual claim Riskier than debt from investors’

7- 1 Outline 7: Dividend Policy 7.1 How Dividends are Paid 7.2 How Do Companies Decide on Dividend Payments 7.3 Why Dividend Policy Should Not Matter 7.4.

1-1 CHAPTER 9 Theories of Capital Structure Controversy of Capital structure Arbitrage effects Optimum capital structure Signaling effects.

Dividend Theory. Issues in Dividend Policy Earnings to be Distributed – High Vs. Low Payout. Objective – Maximize Shareholders Return. Effects – Taxes,

MODIGLIANI – MILLER THEOREM ANASTASIIA TISETSKA. AGENDA:  MODIGLIANI–MILLER I – LEVERAGE, ARBITRAGE AND FIRM VALUE  MODIGLIANI–MILLER II – LEVERAGE,

Key Concepts and Skills

Dividends and Dividend Policy

Mark Fielding-Pritchard

Dividends and Dividend Policy

Dividends and Dividend Policy

Dividends and Dividend Policy

FIN 360: Corporate Finance

Presentation transcript:

Dividends and Dividend Policy

Dividend Definitions (Cash) Net Income Regular Cash Dividend Extra Dividend Special Dividend Asset SalesLiquidating Dividend

Dividend Chronology Declaration DateEx-Dividend Date Record DatePayment Date

Does Dividend Policy Matter? What determines whether dividend policy matters?

Are stock prices affected by dividends? The following assumptions tell us that dividend policy does not matter: –1. The firm’s investment decision will not change regardless of the firm’s dividend policy, and –2. Capital markets are perfect. What do the assumptions mean? How do they affect the relevance or irrelevance of dividend policy?

Implications of Fixed Investment and Dividend Decisions When the firm operates the same set of assets, regardless of what dividend policy it adopts, then 1. the cash flows generated by the assets will not be affected by the firm’s dividend decisions, and 2. the risk of those cash will not be affected by the firm’s dividend decision.

Implications of Perfect Capital Markets 1. There are no corporate nor personal taxes 2. There are no costs to resolving bankruptcy 3. There are no transactions costs for buying or selling stocks 4. There are no differences in the information available to managers of the firm and outside investors 5. All market participants have “equal access” to the market.

A Numerical Example of Why Dividends Don’t Affect Firm Value with our Assumptions Example 1: The firm pays all its earnings out as dividends. The discount rate is 20%. t = 0t = 1t = 2 t = 3 Net Income1,0001,0001,000 Dividend1,0001,0001,000 Present Value2,106

A Numerical Example of Why Dividends Don’t Affect Firm Value with our Assumptions Example 2: Investors want a $200 increase in dividends in years 1 and 2. t = 0t = 1t = 2 t = 3 Net Income1,0001,0001,000 Dividend From Earnings 1,0001,000 1,000 From New Equity (528) Total1,2001, Return to New Equity Holders From Year 1 Infusion 288 From Year 2 Infusion 240 Present Value of Original Shareholders Claims 2,106

Market Imperfections that Influence Dividend Policy Factors Favoring Lower Dividends: Higher personal taxes Flotation Costs Dividend Restrictions Factors Favoring Higher Dividends Higher corporate taxes Distributing Company Receiving Company Desire for Current Income Uncertainty Resolution

Stock Price Reactions to Changes in Dividends Increases in Dividends Decreases in Dividends No Change in Dividends