文档介绍：Chapter 18 Dividend Policy
Chapter 18
Dividend Policy
Dividend Policy
Passive Versus Active Dividend Policies
Factors Influencing Dividend Policy
Dividend Stability
Stock Dividends and Stock Splits
Stock Repurchase
Administrative Considerations
Dividends as a Passive Residual
The firm uses earnings plus the additional financing that the increased equity can support to finance any expected positive-NPV projects3>.
Any unused earnings are paid out in the form of dividends. This describes a passive dividend policy.
Can the payment of cash dividends affect shareholder wealth?
If so, what dividend-payout ratio will maximize shareholder wealth?
Irrelevance of Dividends
M&M contend that the effect of dividend payments on shareholder wealth is exactly offset by other means of financing.
The dividend plus the new stock price after dilution exactly equals the stock price prior to the dividend distribution.
A. Current dividends versus retention of earnings
Irrelevance of Dividends
M&M and the total-value principle ensures that the sum of market value plus current dividends of two firms identical in all respects other than dividend-payout ratios will be the same.
Investors can create any dividend policy they desire by selling shares when the the dividend payout is too low or buying shares when the dividend payout is excessive.
B. Conservation of value
Relevance of Dividends
Uncertainty surrounding pany profitability leads certain investors to prefer the certainty of current dividends.
Investors prefer large dividends.
Investors do not like to manufacture homemade dividends, but prefer pany to distribute them directly.
A. Preference for dividends
Relevance of Dividends
Capital gains taxes are deferred until the actual sale of stock. This creates a timing option.
Capital gains are preferred to dividends, everything else equal. Thus, high dividend-yielding stocks should sell at a discount to generate a higher before-tax rate of return.
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