Professional Documents
Culture Documents
Dividend Policy
Dividend
Example
Example
Cash $1,826,000
Dividend Payable $0
Retained Earning $ 5,797,000
Dividend
Irrelevant
Theory:
Miller
and
Modigliani's theory that in a perfect world, the
firms value is determined sololy by the earning
power and risk of its assets (investments) and
that the manner in which it splits its earnings
stream between dividends and internally retained
(and invested) funds does not affect this value.
Share Repurchase
procedures
Dividend Reinvestment
Plans (DRIPs)
Plans that enable stockholders to use
dividends received on the firms stock to
acquire additional shares-even fractional
shares-at little or no transaction cost.
Clearly the existence of DRIP enables
firms to issue new shares to participants
more
economically,
avoiding
the
underpricing and flotation cost.