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Distributions To Shareholders: Dividends and Repurchases
Distributions To Shareholders: Dividends and Repurchases
CHAPTER 14
Distributions to Shareholders:
Dividends and Repurchases
Bird-in-the-Hand Theory
Theory Implication
Irrelevance Any payout OK
Bird-in-the-hand Set high payout
Tax preference Set low payout
Net
[( )( )]
Dividends = income
Target
equity
ratio
Total
capital
budget
.
14 - 14
Stock Repurchases
Advantages of Repurchases
Disadvantages of Repurchases