BADM 7090 IVC 2010 - Corporate Financing Policy (Dividends)

BADM 7090 IVC 2010 - Corporate Financing Policy (Dividends)...

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BADM 7090 Financial Management Unit IV.C Corporate Financing Policy: Dividends Text material: GSM, Ch. 15 D. Chance
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 2 of 43 Questions Why do companies pay dividends? Why do companies repurchase shares? How do companies determine their dividend payment policies? Is there any way a company can increase shareholder wealth with its dividend policy?
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 3 of 43 Returning Cash to Shareholders Dividends Average about half of earnings Only about a fifth of public companies pay dividends (was about 2/3 in 1978). Why? Share repurchase Average about a third of earnings Have increased substantially in use since 1982, when regulations made it safer to do so without being accused of stock manipulation
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 4 of 43 Returning Cash to Shareholders (cont.) Dividend as a percentage of earnings can vary widely over time. (Dividends are fairly stable while earnings fluctuate.) See Figure 15.2, p. 481
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 5 of 43 Returning Cash to Shareholders (cont.) Fig. 15.4, p. 483. Total Share Repurchases Relative to Dividends
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 6 of 43 Dividends Set by board of directors Regular cash dividends (usually quarterly) Extra or special dividends Stock dividends
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 7 of 43 Dividends (cont.) Key dates Announcement date Holder-of-record date/ex-dividend date (could be a month or so after announcement) With dividend (cum dividend) Ex-dividend Payment date (could be a month or so after ex- date)
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Version: 1/3/11 D. Chance – BADM 7090 – Unit IVC p. 8 of 43 Dividends (cont.) ATLANTA, July 22, 2010 - The Board of Directors of The Coca- Cola Company today declared a regular quarterly dividend of 44 cents per common share. The dividend is payable October 1, 2010, to shareowners of record as of September 15, 2010. This is equivalent to an annual dividend of $1.76 per share, up from $1.64 per share in 2009. The dividend reflects the Board's confidence in the Company's long-term cash flow. The Company returned $5.3 billion to shareowners in 2009, through $3.8 billion in dividends and $1.5 billion in share repurchases. The Coca-Cola Company (NYSE: KO) is the world's largest beverage company, refreshing consumers with more than 500 sparkling and still brands. Along with Coca-Cola®, recognized as the world's most valuable brand, the Company's portfolio includes 12 other billion dollar brands, including Diet Coke®, Fanta®, Sprite®, Coca-Cola Zero®, vitaminwater, Powerade®, Minute Maid®, Simply® and Georgia® Coffee. Globally, we are the No. 1 provider of sparkling beverages, juices and juice drinks and ready-to-drink teas and coffees. Through the world's largest beverage distribution system, consumers in more than 200 countries enjoy the Company's beverages at a rate of 1.6 billion servings a day. With an enduring commitment to building sustainable communities, our Company is focused on initiatives that protect the environment, conserve **This page updated annually
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