Lecture Notes - Weeks 1112 - 1 slide per page

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1、Weeks11and12DividendsandRepurchasesLearningObjectives•Knowthedifferentformsofdividendsandtheappropriatedividendpaymentterminology.•Outlinetheargumentssupportingthecasefordividendirrelevance.•Discussfactorsfavouringaloworahighpayout.•Explaintheresidualdividendpolicy.•Illustratethesituati

2、onofsharerepurchasesvspayingacashdividend.•Understandbothbonusissuesandsharesplits.•Understandwhysharerepurchases(knownasbuyback)areanalternativetodividendsTypesofDividends•Adividendisapaymentmadeoutofafirm’searningstoitsowners(shareholders).•Dividendsareusuallypaidintheformofcash.•Type

3、sofcashdividendsinclude:–regularcashdividends–specialdividendsUS-QuarterlypaymentUK,Australia&NZ-twiceayear.•SharedividendsorBonusShares•SharerepurchasesCashDividends•PubliccompaniesinAustraliacommonlypayregularcashdividendstwiceayear–aninterimdividendandafinaldividend.•Afteradividend

4、isdeclared,itisdistributedtoallshareholdersonaspecificdate.•Theamountofthecashdividendisexpressedintermsofthedollarspershare(dividendspershare).•Dividendsarealsoexpressedasapercentageofthemarketprice(dividendyield)orasapercentageofearningspershare(dividendpayout).ProcedureforDividendPay

5、mentDaysThursday,Wednesday,Friday,Monday,JanuaryJanuaryJanuaryFebruary15213016DeclarationEx-dividendRecordPaymentdatedatedatedateProcedureforDividendPayment•Declarationdate:theboardofdirectorsdeclaresapaymentofdividends.•Ex-dividenddate:ifyoubuytheshareonorafterthisdatethesellerisentitl

6、edtokeepthedividend.UnderASXrules,sharesaretradedex-dividendonandafterthefourthbusinessdaybeforetherecorddate.•Recorddate:declareddividendsaredistributabletoshareholdersofrecordonaspecificdate.•Paymentdate:thedividendchequesaremailedtoshareholdersofrecord.TheEx-datePriceDropExdate-t...–

7、2–10+1+2...tPrice=$10Price=$9Thesharepricewillfallbytheamountofthedividendontheexdate(Time0).Ifthedividendis$1pershare,thepricewillbeequalto$10–1=$9ontheexdate.Beforeexdate(Time–1)Dividend=$0Price=$10Onexdate(Time0)Dividend=$1Price=$9Taxescomplicatethingsabit.Empirically,thepri