PPT-Chapter 17 Dividends, Dividend Policy,

and Stock Splits Learning Objectives Understand the formal process for paying dividends and differentiate between the most common types Explain individual preferences and issues surrounding different dividend policies. Dividend Policy. After Studying Chapter 18, you should be able to:. Understand the dividend retention versus distribution dilemma faced by the firm. . Explain the Modigliani and Miller (M&M) argument that dividends are irrelevant. . Distributions to Shareholders: Dividends and Repurchases. 2. Topics in Chapter. Theories of investor preferences. Signaling effects. Residual model. Stock repurchases. Stock dividends and stock splits. Historical View. Illustrated by the arguments of Gordon (1959) - more dividends = more value. Follows from the discounted dividend approach to valuing a firm:. Historical View. Gordon argued that retained earnings rather than current dividends made the cash flow stream for the shareholder riskier.. Personal . Taxes. The cash flows to investors are typically taxed twice. Once at the corporate level and then investors are taxed again when they receive their interest or . dividend . payment. . For individuals:. Introductory Financial Accounting. Donna Gunn, CA. Shareholders. (Owners of voting shares). Board of Directors. Internal (managers) and. External (non-managers). President . Vice President. (Production). Chapter 17. Chapter Outline. 17.1 Cash Distributions to Shareholders . 17.2 Dividends Versus Share Repurchase in a Perfect Capital Market. 17.3 The Tax Disadvantage of Dividends. 17.4 Payout Versus Retention of Cash. P.V. . Viswanath. Learning Objectives. 2. How is cash returned? The Mechanics. How do we choose between dividends and Share Repurchases?. Why Dividends and Share Repurchases are irrelevant in Perfect Markets. Larry Schrenk, Instructor. Video 49 (Topic 9.4):. Stock Splits, Stock Dividends, and DRIP’s. Topics. Stock Splits. Stock Dividends. Dividend Reinvestment Plans (DRIP). Stock Splits. Stock . Splits. : . Dividends, Retained Earnings, and Income Reporting. 14. Learning Objectives. Explain how to account for . cash dividends. .. Explain how to account for . stock dividends . and splits.. Prepare and analyze a . Owners’ Equity – Preferred Stock. Chapter 11. McGraw-Hill/Irwin. © 2009 The McGraw-Hill Companies, Inc.. Preferred Stock. Preference over common stock. Usually has. no voting rights. Usually has a fixed dividend rate. Stock Valuation . Fundamental. Analysis – looks at financials, product, mgt., history, etc.. PE ratio – . Price / E.P.S.. Zero-Growth Dividend (preferred stock). Constant Growth Dividend (DCF). Nonconstant. Chapter 17. Dividend: cash paid out of earnings. Distribution: cash payment from sources other than earnings. Cash . Dividends & Dividend payment. Dividend forms:. Regular cash dividend – cash payments made directly to stockholders, usually each quarter. When a company makes money (has positive earnings), it can do two things with that money (often a combination of these two things. ):. Reinvest the earnings into the company (Retained earnings). Payout the earnings to the owners (the stockholders) as . DIVIDEND DECISION DIVIDEND POLICY DIVIDEND AND VALUATION Share of profit distributed to shareholders Whether to distribute or not Cash or stock dividend How much(% of earnings to be distributed as dividend): D/P Ratio = DPS/EPS =