Dividends and Share Repurchases(英文版)(ppt 31頁)

Dividends and Share Repurchases(英文版)內容提要：
What is “dividend policy”?
It’s the decision to pay out earnings versus retaining and reinvesting them. Includes these elements:
1. High or low payout?
2. Stable or irregular dividends?
3. How frequent?
4. Do we announce the policy?
Do investors prefer high or low payouts? There are three theories:
Dividends are irrelevant: Investors don’t care about payout.
Bird in the hand: Investors prefer a high payout.
Tax preference: Investors prefer a low payout, hence growth.
Dividend Irrelevance Theory
Investors are indifferent between dividends and retention-generated capital gains. If they want cash, they can sell stock. If they don’t want cash, they can use dividends to buy stock.
Modigliani-Miller support irrelevance.
Theory is based on unrealistic assumptions (no taxes or brokerage costs), hence may not be true. Need empirical test.

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