Dividends

INTRODUCTION A dividend decision policy of a firm is a crucial area of financial management. The importance of a dividend policy is to determine the amount of earnings or profit made by the company to be distributed to shareholders and the amount to be retained in the firm. The amount retained is called retained earnings this are the most significant internal sources of financing the growth of the firm. On the shareholder side dividends are considered desirable because they may increase the…

“There are two main schools of thought in respect to Dividend Policy: the Relevance and the Irrelevance Theories” Explain briefly. What is so important about the Dividend Policy? One of the four main things, any company can do with its profits is to increase equity either by paying the shareholders in the form of a dividend or postponing this payment in the form of a reserve. Furthermore, the amount to pay as dividends is one of the crucial financial decisions the company has to take…

definition a dividend policy is “a company's approach to distributing profits back to its owners or stockholders” (Chegg.com, 2015). Whether or not a company chooses to pay dividends can say a lot about the value a firm and is an important fact to consider when assessing a company. If a firm does give dividends, the way in which they give them (amount and frequency of dividends) is also significant. Foot Locker’s current share price is €66.65. Their dividend yield (the value of a dividend over…

his pioneer model for dividend smoothing, Lintner (1956) proposed that firms in general have a long-run target payout ratio. The role of the managers is to gradually adjust firm payment of dividends toward the target. However, in this model adjustments are partial because they are not free and the firm has to incur a cost for the adjustment. The Lintner model for partial adjustment is given by: Dit – Dit-1 = ai + ci (D*it – Dit-1) + εit (1) where Dt and Dt-1 are dividend payments at times t…

in this case was whether PHBV was the BO on dividends paid by Prevost. This court has considered the “BO” meaning under an OECD tax treaty and used a form over substance approach to determine whether PHVB is the holding company for Prevost. The tax authority argued that the PHBV was not the BO of dividends received from Prevost. However, the court disagreed by relying on Canada’s domestic law definition of BO as “the person who “receives the dividends for his or her own use and enjoyment and…

stock. However, CIMIC Group is a market leader and has strengths such as economies of scale and its increasing ability to take orders, as such, It is likely that CIMIC Group will continue to secure market opportunities, besides, CIMIC Group’s high dividend payout ratio indicates the company is performing well in the market and receives profitable revenue each year. Furthermore, beta higher than 1 implies that investors is expected to receive higher returns than market returns, therefore, for…

There are different asset pricing models used in establishing the required rate of return for different types of assets. The models, including the capital asset pricing model (CAPM), the Arbitrage Pricing Theory (APT), and the Dividend Discount Model (DDM) use several assumptions regarding the information available to investors to establish the value of assets. Information is essential in the financial markets, it influences investors decision to invest and how successful is the investment if…

Hypothetical Portfolio Our equally weighted portfolio includes Apple (AAPL), Whole Foods Market (WFM), Exxon Mobil (XOM), Citigroup (C), and Nordstrom (JWN). All of the companies chosen are paying dividends quarterly, and make up to 6.557% of S&P 500 as of today. From 2011 until today we see that our portfolio has had, return-wise, a similar performance to the S&P 500 with around 11% annual returns. Also, the correlation coefficient of 0.85 tells us that our portfolio is highly…

Which positions exceeded your expectation and which factors created a gap? The position of company Vanguard Dividend Appreciation Idx Inv (VDAIX) was beyond the expectations. The reason is that when we invested in the stock it was operating at the share price of 30.16 on 1st February. In this way, the historical stock price trend of the company indicates that the company was operating profitably and we invested in this portfolio. However, the stock started to decline and the fluctuations were…

Brigham(2008) tax reference theory states that shareholders prefer retain earning rather than pay as dividends. It is because taxes on dividends must be paid immediately once you received the dividends and most of the countries dividends tax rate higher than capital gain tax. However, taxes of capital gain can be deferred into future. Damodaran (1999) states that bird in hand theory implies that cash dividends are considered like a bird on hand but the retained earnings are like a bird in…