Chapter 7 Dividend Policy
Chapter 7 Chapter 7 Dividend Policy Dividend Policy
Why Dividend Policy is important? Dividend:a cash distribution of earning Types of Dividends Cash dividends,Stock dividend,Stock split Dividend policy will determines: 1. What funds flow to investor 2. What funds are retained by the firm for reinvestment 3. Information concerning firm performance slide 1
slide 1 Why Dividend Policy is important? Why Dividend Policy is important? Dividend: a cash distribution of earning Types of Dividends Cash dividends, Stock dividend, Stock split Cash dividends, Stock dividend, Stock split Dividend policy will determines: 1. What funds flow to investor What funds flow to investor 2. What funds are retained by the firm for reinvestment What funds are retained by the firm for reinvestment 3. Information concerning firm performance Information concerning firm performance
Key Questions Can the payment of cash dividends affect shareholder wealth? If so,what dividend-payout ratio will maximize shareholder wealth? slide 2
slide 2 Key Questions Key Questions Can the payment of cash dividends Can the payment of cash dividends affect shareholder wealth? affect shareholder wealth? If so, what dividend If so, what dividend -payout ratio payout ratio will maximize shareholder wealth? will maximize shareholder wealth?
Topics to be Discussed -The irrelevance of Dividend Policies in a world of perfect capital markets Dividend Policy in a real world Dividend Stability ■ Stock Repurchase ■ Stock Dividends and Stock Splits Summary slide 3
slide 3 Topics to be Discussed Topics to be Discussed The irrelevance of Dividend Policies in a world of perfect capital markets Dividend Policy in a real world Dividend Stability Stock Repurchase Stock Dividends and Stock Splits Summary
The irrelevance of Dividend Policy Assumption 1.Perfect market 2.Homogeneous expectation 3.The investment is not altered by changes in dividend policy slide 4
slide 4 The irrelevance of Dividend Policy The irrelevance of Dividend Policy Assumption 1. Perfect market 2. Homogeneous expectation 3. The investment is not altered by changes in dividend policy