Investing
The premise of Modigliani and Miller, that dividend policy is basically irrelevant in that if a firm is growing then an internal dividend is created and the investor may sell shares to capture this dividend, is based on the idea that in today's market fundamentals matter. They do not. Today's market is driven by central bank policy. Quantitative Easing (QE) has so altered the market and eradicated true price discovery that a simple comparison of charts -- one of a global economy that is collapsing and one of a U.S. stock market at all-time highs -- is enough to persuade any rational person that an examination of central bank balance sheets is warranted. Such an examination would uncover trillions in exposure. The Bank of Japan for instance was a top 10 holder of 90% of the Nikkei in April and has only increased its stake since then (Durden). The ECB is following suit: it began buying government bonds, then corporate bonds, and soon it may be buying stocks directly -- the final prop before Ben Bernanke's "helicopter money" is dropped in order to "save" the markets.
Dividend policy is not irrelevant -- but central banks...
Dividend Policy What are the practical considerations which are likely to influence a firm's dividend policy? Does a firm's dividend policy matter? Inside a firm's dividend policy there are a number of different factors that will have an impact upon: the amount and if one will be paid to shareholders. The most notable include: the growth rate of the company, credit agreements, earnings stability, maintaining control over the float, uncertainty, the ability
Even their regular dividends were increased from 8 cents per share per quarter to 16 cents. This is quite a high rate of increase. This sort of announcements was also made by banks like Wachovia and Mellon, and consumer staples like Altria and Kraft. The attitude of the investors can be seen from the fact that the companies which have traditionally paid dividends have performed better in terms of
Dividend Policy for Home Retail Group Plc and Yell Group Plc 2008, 2009, 2010 Once a company is profitable, the executives must determine what to do with the profits. The firm may continue to retain the profits, or it may pay out the profits to the owners/shareholders of the firm in the form of dividends. Once the firm decides on whether or not to pay dividends, it may establish a semi-permanent
It carries the balanced and effective cash flow in a long-term period and fosters the value of a firm. The crux is to render firms more adaptable to future changes of environments and realize value creation and continuous growth. Since value creation happens to be the initial stage of value management, therefore the main feature of a dividend policy founded on value management and rising it to realize the
However, theoretically, they could experience a dramatic increase in the future, if the company is run well. According to the article in Forbes magazine entitled "A Progressive dividend policy," the final outcome for Progressive shareholders is likely to be an increase in profits during most ordinary, reasonably profitable years, although now dividends will be paid annually rather than quarterly (Carlson 2006, p.1). (This may also be seen as a
Capital Structure and the Dividend Policies Investment in firms Miller-Modigliani Theorem Impact of taxes Impacts of bankruptcy Dividend Signaling Clientele effect The general principles for investment are applicable to every business and these may be outlined simply through saying the one should invest in projects that provide greater yields than the basic minimum acceptable rate. The rate is naturally to be dependent on the risk involved in the project. It should also reflect the basic financing mix
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