1. 1 of 24 ©2012 McGraw-Hill Ryerson Limited Learning Objectives 3.Outline the many factors to be considered in dividend policy. Calculate aftertax income from dividends and calculate share prices based on earnings multiples. (LO3) 4.Outline the life cycle and growth of dividends. (LO4) 5.Outline dividend payment procedures. (LO5)

2. 2 of 24 ©2012 McGraw-Hill Ryerson Limited Life Cycle Growth and Dividends Figure 18-3 shows a corporate life cycle and the corresponding dividend policy most likely to be found at each stage Stage I - Development –no cash dividends Stage II - Growth –stock dividends, low cash dividends Stage III - Expansion –stock dividends, moderate cash dividends, stock splits Stage IV - Maturity –moderate to high cash dividends LO4

3. 3 of 24 ©2012 McGraw-Hill Ryerson Limited Development Stage I Development Stage I Growth Stage II Growth Stage II Expansion Stage III Expansion Stage III Maturity Stage IV Maturity Stage IV No cash dividends Stock dividends Low cash dividends Stock dividends Low to moderate cash dividends Stock splits Moderate to high cash dividends Sales ($) Development Expansion Maturity Decline Time Growth Figure 18-3 Life cycle growth and dividend policy LO4