Distributions to Shareholders: Dividends and
Share Repurchases
CHAPTER 15
Dividends versus Capital Gains
Dividend Irrelevance Theory
Reasons some investors prefer dividends
Reasons some investors prefer capital gains
Other dividend policy issues
Information content or signaling hypothesis
Clientele effect
Information (Signaling) content
Clientele Effect
Establishing the dividend policy in practice
Setting the target payout ratio: the residual
dividend model
Earnings cashflows and dividends
The Residual Dividend Model
Low-regular-dividend-plus-extras
Earnings, Cashflows and Dividends
Payment Procedures
Dividend Reinvestment Plans
Summary of factors influencing dividend policy
Stock Dividends and Stock Splits
Stock Repurchases
Effects of Stock Repurchases
Advantages of repurchases
Disadvantages of repurchases
Conclusions on stock repurchases