5.2 - Divedend Policy - Student

5.2 - Divedend Policy - Student - Dividend Policy 14-1 s...

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Unformatted text preview: Dividend Policy 14-1 s Theories of investor preferences s Signaling effects s Residual model What is dividend policy? s The decision to pay out earnings versus retaining and reinvesting them. ividend policy includes 14-2 s Dividend policy includes s High or low dividend payout? s Stable or irregular dividends? s How frequent to pay dividends? s Announce the policy? Do investors prefer high or low dividend payouts? s Three theories of dividend policy: s Dividend irrelevance: Investors don’t care about payout. 14-3 care about payout. s Bird-in-the-hand: Investors prefer a high payout. s Tax preference: Investors prefer a low payout. Dividend irrelevance theory s Investors are indifferent between dividends and retention-generated capital gains. Investors can create their own dividend policy: they want cash, they can sell stock. 14-4 s If they want cash, they can sell stock. s If they don’t want cash, they can use dividends to buy stock....
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5.2 - Divedend Policy - Student - Dividend Policy 14-1 s...

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