lecture6_DividendPolicy.pdf - Intermediate Finance Lecture 6 Payout Policy Michael Hasler Department of Management UTSC 0 22 Questions How do firms

lecture6_DividendPolicy.pdf - Intermediate Finance Lecture...

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Intermediate Finance Lecture 6: Payout Policy Michael Hasler Department of Management UTSC 0 / 22
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Questions How do firms transfer funds to shareholders? How often should firms transfer funds to shareholders? How much should firms transfer to shareholders? Does payout policy affect shareholders value? 1 / 22
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Percentage of Firms paying Dividends 2 / 22
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Dividend Policy Heterogeneity Dividend payout ratio = Dividends/Earnings Examples of dividend payout ratio: Dow Chemical: 57.81% Texaco: 84.11% Deere: 85.44% Microsoft: 0.00% Walmart: 16.00% 3 / 22
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Two Forms of Payments Dividend Payments Share Repurchase 4 / 22
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Distribution of Dividends and Repurchases 5 / 22
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Dividend Payments Price Correction The stock price drops when dividends are paid The size of the drop depends on the amount of the dividend and tax rates (more on this later) 6 / 22
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Dividend Payments Implementation 1 Declaration Date: Firm announces its next dividend (amount) as well as a record date and a payment date 2 Ex-Dividend Date: 2 business days before the record date. First day the stock (that was trading cum-dividend before) starts trading ex-dividend. If investor holds a share right before and at the beginning of the ex-dividend date, then she/he will receive the dividend 3 Record Date: The company establishes the list of (possibly former) shareholders that are entitled to the dividend payment 4 Payment Date: Dividend is paid to recorded shareholders 7 / 22
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Dividend Payments Illustration 8 / 22
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Dividend Payments Example Dividends are usually paid quarterly Example: Boeing Company ( ) Declaration Ex-Dividend Record Payment Dividend Apr 30 2012 May 09 2012 May 11 2012 Jun 01 2012 0.44 Jun 25 2012 Aug 15 2012 Aug 17 2012 Sep 07 2012 0.44 Oct 28 2012 Nov 07 2012 Nov 09 2012 Dec 07 2012 0.44 Dec 17 2012 Feb 13 2013 Feb 15 2013 Mar 08 2013 0.485 9 / 22
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Stock Repurchase
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  • Fall '16
  • SyedAhmed
  • Finance, Dividend

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