Report on Dividend policy Case analysis on Bank EXECUTIVE SUMMARY A dividend is a usually distributed in cash form to stock holders of a corporation approved by the board of director. It may also include stock dividend or other forms of payment. A stock dividend represents a distribution of additional shares to common stockholders. Dividends are only cash payments regularly made by corporations to their stockholders. The dividend policy such as the payment of dividend affects the market
Theory 2.1.1 Dividend 2.1.1.1 Definition of Dividend According to investopedia, dividend is a distribution of amount of company’s earnings that have been decided by board of directors, to their shareholders. Dividends are cash payments that corporations make to their common stockholders (Gallagher and Andrew, 2013). Dividend per share can be calculated as follow: DPS=(Cash Dividend)/(Outstanding Shares) 2.1.1.2 Types of Dividend Based on Accounting Tools, There are five types of dividend. Cash Dividend
Meaning of Dividend Dividends refers to the returns from investments in shares of Equity, they are simply the distribution of a firm’s profits (Net of Tax) to its Shareholders. In case of profit generation, every firm has two options; whether to retain the money for future investments, and in this case it would be called retained earnings, or distribute it to Shareholders in one of the forms of dividends described below. The decision of whether to retain the profits or distribute dividends, and the
TABLE OF CONTENTSINTRODUCTION3PERFORMANCE OF AVON'S STOCK FROM 1978-19883EVALUATION OF AVON' S FINANCIAL CONDITION IN MID-19885PURPOSE OF THE EXCHANGE OFFER6EVALUATION OF THE TRADE-OFF7REFERENCES10INTRODUCTIONA firm's decisions about dividends are often mixed up with other financing and investment decisions. Some firms pay low dividends because management is optimistic about the firm's future and wishes to retain earnings for expansion. Other firms might finance capital expenditures largely by borrowing
to pay higher dividends to avoid the cost of external financing. While firm value can be increased by financial leverage, too much leverage leads to a shrinking company value as bankruptcy costs start to outweigh tax shield benefits. The higher risk makes debt holders asking for higher returns to compensate them for the increase in bankruptcy risk. Since dividend payments reduce the amount of capital available to secure the debt, many debt contracts include restrictions on dividend payments. Bond
CHAPTER 14: DISTRIBUTIONS TO SHAREHOLDERS: DIVIDENDS AND SHARE REPURCHASES 1. The optimal distribution policy strikes that balance between current dividends and capital gains that maximizes the firm's stock price. a. True b. False ANSWER: True 2. Other things held constant, the higher a firm's target payout ratio, the higher its expected growth rate should be. a. True b. False ANSWER: False RATIONALE: The higher the payout ratio, the less of its earnings the firm reinvests in the business
Immediate Cash Dividend plus a Large Stock Dividend Leading to almost the same result, the immediate cash dividend together with a large stock dividend is not as recommendable as the third proposal is. Stock dividends are not efficient when one is trying to reduce the share price. They are normally used to maintain the price of a share or to slightly lower it. So in the case of Georgia Atlantic a stock split might be better than a stock dividend to cut the share price. 5) Cash Dividend, Stock Split, and
SHAREHOLDERS: DIVIDENDS AND SHARE REPURCHASES (Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Conceptual Easy: Dividends versus capital gains Answer: d Diff: E [i]. Myron Gordon and John Lintner believe that the required return on equity increases as the dividend payout ratio is decreased. Their argument is based on the assumption that a. Investors are indifferent between dividends and capital gains. b. Investors require that the dividend yield and
management must decide on the form of the dividend distribution, generally as cash dividends or via a share buyback. Various factors may be taken into consideration: where shareholders must pay tax on dividends, firms may elect to retain earnings or to perform a stock buyback, in both cases increasing the value of shares outstanding. Alternatively, some companies will pay "dividends" from stock rather than in cash. The purpose of an optimal dividend policy should be to maximize shareholders’ wealth
eurojournals.com Dividend Policy: A Review of Theories and Empirical Evidence Husam-Aldin Nizar Al-Malkawi Corresponding Author, Faculty of Business, ALHOSN University P.O. Box 38772 - Abu Dhabi, UAE E-mail: h.almalkawi@alhosnu.ae Michael Rafferty Senior Research Analyst, WRC, University of Sydney, Australia E-mail: m.rafferty@econ.usyd.edu.au Rekha Pillai Faculty of Business, ALHOSN University, Abu Dhabi, UAE E-mail: r.pillai@alhosnu.ae Abstract The literature on dividend policy has produced a large