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Dividend and Share Repurchases
  •  Regular Cash Dividends
Dividend Reinvestment Plan (DRP): No floatation costs

Special Dividends: Used especially by cyclical companies in periods of strong earnings

Liquidating Dividends: Company goes out of business
 
  • Stock Splits
     
  • EPS and other per market data decline by half
     
  • P/E, Dividend Yield are same
     
  • Wealth remains same
     
  • Reverse Stock Splits
     
  • Share Repurchases
     
  • Earning yield > Cost of debt then EPS increases
     
  • Earning yield < Cost of Debt then EPS is reduced
     
  • If market price > BVPS then book value per share reduces after repurchase
     
  • If market price < BVPS then book value per share increases after repurchase

 

For equal taxation and information content cash dividends = share repurchases





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