RSM333H1 Chapter Notes - Chapter 22: Dividend Policy, Free Cash Flow, Dividend
Document Summary
No legal obligation for firms to pay common shareholders a dividend. Once it is declared, it is a contractual commitment. Bod cannot declare a dividend if by doing so it causes financial distress and makes the firm unable to fulfill its contractual commitments. If the bod declares one anyways they can be held personally liable for damages. Ex-dividend date date after which shares trade without the right of the purchaser to receive a dividend. Special dividend a dividend over and above a firm"s normal dividend that the bod indicates is not likely to be repeated. Dividend reinvestment plans (drips), stock dividends, and stock splits. If the investor doesn"t want to receive a dividend, some firms offer the option of using the cash dividend proceeds to buy new shares by way of a drip. Dividend reinvestment plan a plan that allows investors to use dividends to buy new shares.
