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Chapter 13 dividend

QuestionAnswer
Dividends cash distributions made to stockholders from the firm's earnings
optimal dividend policy strikes a balance between current dividends and future growth and maximizes the firms stock price
Dividend irrelevance thoery states the firms dividend policy has no effect on either or cost of capital
dividend relevance theory theory that the value of the firm is affected by the dividend policy.
information content(signaling) hypothesis the theory that investors regard dividend changes as signals of mgmt earnings forecasts
Clientele effect to attract the type of investor who likes its dividend policy
Free cash flow hypothesis All else is equal, the firm should distribute any earningsthat cannot be reinvested at a rate at least greater then the investors required rate.
residual dividend policy Dividend only paid when earnings are greater than what is needed to finance the equity portion of the firm's optimal budget for the year.
stable,predicitable dividends payment of a specific dividend each year, or periodically increasing dividend
constant payout ratio payment of a constant percentage of earnings as dividends each year
extra dividend a supplement dividend paid in years when a firm has excess funds to distribute
Declaration Date The day the dividend becomes a Liability
Holder-of-record-Date The date the company determine who recieves the dividend
Ex-Dividend Date The date dividende stop, New purchasters dont receive dividends
Payment Date The Date the firm makes the dividend Payment
Dividned re investment Plan (DRIP) Enables stockholders to automatically reinvest dividends recieved back into the stock of the paying firm.
Stock Split A action taken by a firm to increase the # of shares outstanding which decrease the per share stock price.
Stock Dividend dividends paid as additional shares of stock instead of cash
Created by: 5000587
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