25557 Chapter Notes - Chapter 16: Market Capitalization, Root Mean Square, Dividend Imputation
Document Summary
Discounted cash flow models - stock price is the present value if future dividends per share. Today"s market capitalisation and share price are not affected by how payout is split between dividends and repurchases. Shifting payout to repurchases reduced current dividends but produces an offsetting increase in future earnings and dividends per shares. When valuing cash ow per share, it is double counting to include both dividends per share and cash received from repurchases. It makes no difference to the old shareholder that they receive an extra cash dividend that is exactly offset by a lower stock price (capital loss) Some nancial institutions are legally restricted form holdings of stocks lacking established dividend records. Dividends are regarded as spendable income whereas capital gains are additional to principal. Some investors look to dividends from the stock portfolios as a steady source of cash to live on. Regular dividends relied shareholders of transaction costs and considerable inconvenience of selling shares.
