Chapter 6 - Dividends and share repurchases: Basics. This chapter describe regular cash dividends, extra dividends, stock dividends, stock splits, and reverse stock splits, including their expected effect on a shareholder’s wealth and a company’s financial ratios. | Chapter 6 Dividends and Share repurchases: Basics Presenter’s name Presenter’s title dd Month yyyy 1 1. Introduction A dividend is a pro rata distribution to shareholders that is declared by the company’s board of directors and may or may not require approval by shareholders. A repurchase of stock is a distribution in the form of the company buying back its stock from shareholders. The board of directors determines the company’s payout policy. Cash dividends and share repurchases are both methods of distributing cash to shareholders. The effects on financial ratios and on shareholders’ investment returns are different between these two methods. These distributions may provide information about the company’s future prospects. Issuing companies cannot deduct distributions to shareholders for tax purposes. Copyright © 2013 CFA Institute 2 LOS: Describe regular cash dividends, extra dividends, stock dividends, stock splits, and reverse stock splits, including their expected effect on a shareholder’s wealth and a company’s financial ratios. Pages 229–230 Introduction A cash dividend is based on the number of shares an investor owns. A share repurchase is an opportunity for investors to sell shares back to the issuing company. Both a cash dividend and a share repurchase are methods of distributing cash to shareholders. International differences: whether a dividend is approved by shareholders and whether dividends received are taxed and at what rate(s). 2 2. Dividends: Forms Copyright © 2013 CFA Institute 3 LOS: Describe regular cash dividends, extra dividends, stock dividends, stock splits, and reverse stock splits, including their expected effect on a shareholder’s wealth and a company’s financial ratios. 2. Dividend: Forms 3 Regular cash dividends A regular cash dividend is a cash dividend paid at regular intervals of time The regular intervals may be any frequency, but the most common are quarterly, semiannually, or annually. Tendency of companies is to maintain or . | Chapter 6 Dividends and Share repurchases: Basics Presenter’s name Presenter’s title dd Month yyyy 1 1. Introduction A dividend is a pro rata distribution to shareholders that is declared by the company’s board of directors and may or may not require approval by shareholders. A repurchase of stock is a distribution in the form of the company buying back its stock from shareholders. The board of directors determines the company’s payout policy. Cash dividends and share repurchases are both methods of distributing cash to shareholders. The effects on financial ratios and on shareholders’ investment returns are different between these two methods. These distributions may provide information about the company’s future prospects. Issuing companies cannot deduct distributions to shareholders for tax purposes. Copyright © 2013 CFA Institute 2 LOS: Describe regular cash dividends, extra dividends, stock dividends, stock splits, and reverse stock splits, including their expected effect on a .
