Textbook Notes (363,507)
Canada (158,391)
Economics (800)
ECON 2560 (71)
Chapter 18


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University of Guelph
ECON 2560
Nancy Bower

THEORYOF FINANCE CHAPTER 18HOW DIVIDENDS ARE PAIDCash dividendsoStock exchanges fix a cut off date called the exdividend date two business days prior to the record dateoThe only difference between buying stock before and after the exdividend date is that in the csecond case you miss out on the dividenStock Dividends Stock Splits and Reverse SplitsoCompanies often declaire stock diividendsIt would send shareholders an extra share for their percentage 10 percent stock dividend would yield one extra share for every ten you wonedoA stock dividend is like a stock splitin both cases the shareholder is given a fixed number of new shares for each share holdoSometimes a firm will opt for a reverse split which would effectively reduce its number of outstanding sharesDividend Reinvestment Plans and Share Purchase PlansoMany firms offer their shareholders additional means of investing in new shares through dividend reinvestment plansand share purchase plans oShareholders have the option of reinvesting their dividend receipts into additional shares of the firm through a dividend reinvestment plan oFirms also provide shareholders the choice of acquiring additional shares through share purchase plans into which they can make cash contributionsSHARE REPURCHASEWhen a firm wants to pay cash to its shareholders it usually declares a cash dividendHOWEVER an alternative method is for the firm to repurchase its own stockoIn a stock repurchase the firm pays cash to purchase shares from its shareholdersFour main ways to implement a stock repurchase
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