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Fundamentals of Corporate Finance, 4/c/e

Fundamentals of Corporate Finance, 4/e

Stephen A. Ross, Massachusetts Institute of Technology
Randolph W. Westerfield, University of Southern California
Bradford D. Jordan, University of Kentucky
Gordon S. Roberts, York University

Dividends and Dividend Policy

Learning Objectives

After studying this chapter in the textbook, you should be able to:

Outline the chronology of events that precede the payment of a cash dividend.

Understand what happens to the price of a share of stock on the ex dividend day.

Explain the term homemade dividends and discuss the associated implications for dividend policy.

List and discuss the factors favouring a low/high dividend payout.

Discuss the information content effect of dividends and the related relevance to dividend signaling.

Explain and discuss the clientele effect.

Determine the optimal dividend payout according to the residual dividend approach.

Contrast the residual dividend approach with dividend stability.

List the steps in a compromise dividend policy.

Compare and contrast cash dividends and share repurchases.

Understand the effect on share price of stock splits, reverse stock splits and stock dividends.

2002 McGraw-Hill Higher Education
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