Ch%2018%20(%20Dividends%20and%20Dividend%20Policy)[1]

Ch%2018%20(%20Dividends%20and%20Dividend%20Policy)[1] - 18...

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18 Dividends and Dividend Policy Slide 18 - 1 Key Concepts and Skills ± Understand dividend types and how they are paid ± Understand the irrelevance of dividend policy ± Understand why share repurchases are an alternative to dividends ± Understand the difference between cash and stock dividends
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Slide 18 - 2 ± Dividend Dividend is a payment made out of a firm’s earnings to its owners, in the form of either cash or stock. Basic Types of Cash Dividends ¾ Regular cash dividend: cash payments made directly to stockholders, usually each quarter. ¾ Extra cash dividend: indication that the “extra” amount may not be repeated in the future. ¾ Special cash dividend: similar to extra dividend, but definitely won’t be repeated. ¾ Liquidating dividend: some or all of the business has been sold. Cash Dividends Slide 18 - 3 ± A Chronology z Declaration date: The board declares the dividend and it becomes a liability of the firm. z Ex-dividend date ¾ If you buy the stock before this date, you are entitled to the dividend; if you buy the stock on this date or after, the previous owner will get the dividend. ¾ Stock price generally drops by about the amount of the dividend. z Date of record: holders of record are determined and they will receive the dividend payment, which is the date two business days after the ex-dividend date. z Date of payment: checks are mailed. Dividend Payment
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Slide 18 - 4 Figure 18.2. Cum-dividend stock price vs. ex-dividend stock price. Dividend Payment and Price Change Slide 18 - 5 ± Dividends Matter Dividends matter because t he value of the stock is based on the present value of expected future dividends. ± Dividend Policy May Not Matter
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This note was uploaded on 07/30/2011 for the course STAT 3801 taught by Professor Kc during the Fall '11 term at HKU.

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Ch%2018%20(%20Dividends%20and%20Dividend%20Policy)[1] - 18...

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