FNCE30002 Lecture Notes - Lecture 4: Cash Flow, Price Signal, Tax Rate
Document Summary
Three ways to generate return on a share: dividends cash payments from company to shareholders, franking credits tax credits representing corporate tax paid on distributed profit, share buyback companies buys back own equity from market. Share buybacks: can buy back on pro-rata basis from existing shareholders like a reverse rights issue, can buy back from select group of shareholders like a reverse private placement. Investment decision: financing decision between debt and equity, payout decision relating to shareholder"s equity. Dividend policy: dividend policy is concerned with distribution of cash (earnings) to shareholders, two methods of doing this, dividends, share repurchases. In absence of taxes and transaction costs, two methods are virtually identical: both techniques enable australian companies to pass on tax credits to shareholders. I n a u s t r a l i a: dividends typically paid semi-annually interim & final, dividend announcements typically coincide with profit announcements, historically dividends have been paid only out of profit.
