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Finance_13

Dividend Policy and Internal Financing

QuestionAnswer
The amount of dividends relative to the company's net income or earnings per share. Dividend Payout Rate
Dividend Irrelevance View
"High Dividends are Best" View
Low Dividends are Best" View
A company's dividend payment should equal the cash left after financing all the investments that have positive net present values. Residual Dividend Theory
The belief that individuals and institutions that need current income will invest in companies that have high dividend payout.s Clientele Effect
Information Effect
The difference in accessibility to information between managers and investors, which may result in a lower stock rock than would be true in conditions of certainty. Information Asymmetry
Costs associated with potential conflict between managers and investors when these two groups are not the same. Agency Costs
No matter what the decision area, how the market price responds to management's actions is not determined entirely by the action itself. Expectations Theory
A dividend payment policy in which the percentage of earnings paid out in dividends is held constant. The dollar amount fluctuates from year to year as profits vary. Constant Dividend Payout Ratio
A dividend policy that maintains a relatively stable dollar dividend per share over time. Stable Dollar Dividend Policy
A corporate policy of paying a small regular dollar dividend plus a year-end extra dividend in prosperous years to avoid the connotation of a permanent divided. Small, Regular Dividend Plus a Year-End Extra
Increasing Stream Policy
The date upon which a divided is formally declared by the board of directors. Declaration Date
Date at which the stock transfer books are to be closed for determining the investor to receive the next dividend payment. Date of Record
The date upon which stock brokerage companies have uniformly decided to terminate the right of ownership to the dividend, which is two days prior to the date of record. Ex-Dividend Date
The date on which the company mails a dividend check to each investor of record. Payment Date
A distribution of shares of up to 25 percent of the number of shares currently outstanding, issued on a pro rata basis to the current stockholders. Stock Dividend
A stock dividend exceeding 25 percent of the number of shares currently outstanding. Stock Split
The repurchase of common stock by the issuing firm for any other variety of reasons, resulting in reduction of shares outstanding. Stock Repurchase
A formal offer by the company to buy a specified number of shares at a predetermined and stated price. The tender price is set above the current market price in order to attract sellers. Tender Offer
Open Market Repurchase
Created by: Wilkins188