25557 Chapter Notes - Chapter 16: Dividend, Root Mean Square, Stock Split
Document Summary
Companies hand cash back to their shareholders either through dividends or buying back shares. Though total dividend payments have increased fairly steadily, the fraction of companies that pay dividends has declined partly because many newly listed rms are growth companies that will not pay a dividend. A stock dividend of 5% gives each shareholder ve extra shares for every hundred shares currently owned, same as a stock split. Both increase the number of shares but do not affect the rm"s assets, pro ts or total value, so both reduce value per share. Allows shareholders to have dividends on some or all of their shares automatically reinvested in the company, without transaction costs and usually at a small discount to the market price. Allows rms to retain part of their dividends as internal cash ow. Introducing a drp allows rms to meet shareholder"s demand for higher dividend payouts without using more cash. Non-participating shareholders suffer whenever a price discount is offered.
