Tuesday 29 January 2019

Dividends - Meaning, dividend Yield, dividend Stock


The Ratio Of Payments Target (Target Payout Ratio)

Expressed as a percentage of the net profit will be paid as cash dividends. It is based on the preference of investors to choose between dividends or capital gains, whether investors prefer:
Profits distributed as dividends or cash,
Let the company buy back or embed back in business with the hope of gaining an advantage in the future.
This is taken into account:

Po = D1/Ks-g

Optimal Dividend Policy

dividend policy is to achieve a balance between the current dividend and growth in the foreseeable future and maximize the stock price of the company.

In this section we see 3 theories about investor preferences:

Dividend Theory, Merton M and Franco Modiglian argued that the company's value is only determined by the basic ability to generate profit and its business risk. In other words, that the value of a company depends only on profits made by assets-its assets, not on the part of the profit will be divided into dividend earnings balance of an arrest.

The theory of the "bird in hand" (published in the hand theory), is a theory which States that the value of a company will be maximized by setting a high dividend payment ratio.

The theory of tax preferences, when viewed from a tax point of view, investors generally will love the low dividend payments rather than receive payments are high, it is influenced by several factors, namely:

  1. Long-term capital gains tax rate of 20%, while the rate of dividend effective profit which can reach a maximum of 38.6%. Investors who receive most dividends select hold or infuse its profits back in the business, so that profit growth will probably lead to a rise in stock prices, and as a result the capital gains with low taxes will replace dividend taxes high.
  2. Taxes on profits will not be paid until the shares are sold. A beneficiary is not subject to tax on capital gains

Because of the prominence of the investors generally liked companies hold the majority of their profits.

Factors affecting the dividend policy

The company's Liquidity Position, because the dividend is "cash outflow" then the more powerful position of liquidity of a company, means a greater ability to pay dividends. By itself the liquidity of the company is determined by the decisions in the field of investment and the way the fulfillment of the needs of the Fund. Then it can be said that the more robust liquidity position of the company against the prospect of future funding needs, the higher the "dividend payout ratio".

Needs funds to pay its debt, when the company established that repayment of debts will be taken from the profit on hold. Means the company minimize dividend payment. in other words, the company set a dividend payout ratio is low.

The company's growth rate, faster business growth means higher also funds to finance the growth of the company. In this situation usually prefers the company of restrained earnings rather than paid out as dividends, this means lower "dividend payout ratio". If the company has been able to meet its needs from the source of the funds or other capital market so companies can set a "dividend payout ratio is high."

Surveillance against the company, entrust on internal spending effort in order to maintain control of the company, this means reduced "dividend payout ratio".

  • All kinds of dividend policy
  • Stable dividend policy
  • Dividend policy with determination the amount of dividends of at least a certain amount of extra plus
  • Dividend policy dividend payout ratio assignment with a constant
  • Flexible dividend policy

The Residual Dividend Model

A Model in which the dividend is paid would be determined the same as net income minus the amount of the balance of the was detained is needed to fund the company's optimal capital budget.
  • According to this model the company will follow the 4 steps in determining the target payout ratio:
  • Determining the optimal capital budget
  • Determine the amount of equity needed to meet the budget
  • Profit was arrested used thank you satisfy the needs of equity
  • The dividend is payable if profits are available in more than is needed to support the optimal capital budget.

If the company guided the residual dividend policy thus stated:

Dividends = net profit-profit balance being held to fund investment – new investment
= net profit – [(Equity Ratio target) (total the capital budget)]

If the company follows the model of the residue then let:
Earnings estimates and investment opportunities of the company, on average, for a period of about five years into the future.

Using the forecast information to calculate the ratio of payment residual model and the dollar amount of dividends during the period of planning.
Specify a target payout ratio based on data that has been projected

Payment procedure

The date of the Declaration, the date on which the company's Board of Directors issued a statement announcing a dividend payment.

Shareholder Date Recorded, if the list of companies declared shareholders as an owner on the date today. Then the shareholders will receive a dividend.

Dividend Ex Date, the date on which entitlement to dividends is currently no longer accompanies a shares, usually 2 working days before the date of the shareholders on record.

The date of payment, the date on which a company is really sending a Check payment dividend.

Factors affecting the dividend policy

a. Limitations

  • Restrictions on preferred stock
  • Capital value decline rules
  • The availability of cash
  • Tax on profit accumulation sanctions incorrectly

b. investment opportunities

The number of profitable investment opportunities
Possibility to speed up or delay the project

c. an alternative source of capital

  • The cost of the sale of new shares
  • Ability to replace debt with equity Control

d. influence of dividend policy in Ks

The desires of shareholders will profit the current vs future profits
Acceptance of any risk of dividends vs. capital gains
The tax advantages of a capital gains over dividends
The information content of dividends (signaling)

  • Dividend and Splitting of shares
  • The stock solution of the action taken by a company to increase the number of shares outstanding.
  • Dividend Stock
  • Dividend paid in the form of additions to the stock and not cash the influence On stock prices
  • The stock price is going up
  • The company's stock price increase due to the signals the prospect of profit and dividend
  • The share price would fall if not announced the existence of a rise in profit and dividend

Purchase Return Shares(Stock Repurchases)

An alternative to the cash dividend payment, the company may purchase the shares back. Purchase the company's shares outstanding can be done via the secondary market stock exchange. The shares bought in the accounts of the treasury stock. Theoretically, the value of the company before and after the purchase of stock returns will be the same.

Advantages Of Purchase Of Stock Returns

The purchase of stock returns could save tax.
The announcement of the buyback could be regarded as a positive signal by investors, for the purchase of stock returns is often driven by the motivation of managers who presume that they undervalued stocks that prices (lower than should be).
Dividend payment is usually done with a stable pattern.
Shareholders have the option with the purchase of stock returns. In need of cash, they could sell shares they earn. Conversely, if do not need the cash, or avoid taxes, they can be invested back into the company's stock.
In some specific situation, purchasing shares again performed selectively

Disadvantages Of Purchasing Stock Returns

  • Shareholders can have different preferences between cash dividend and buying back shares (gain derived from capital gains). The cash dividend is likely to be more reliable ' can ' because it gives a clear income (cash accepted), and relatively stable.
  • The company is probably paying the purchase price too high again, to the detriment of current shareholders (who still holds shares).
  • Shareholders who sell their shares, perhaps not knowing exactly the implications and effects of the programs purchase of stock returns. If it turns out that feel aggrieved, they can sue the company.

Stock Dividend and Stock Split

Accounting Adjustment share dividends and Stock Split (Splitting of shares)
the consequences of dividends in shares and stock split is to increase the number of outstanding shares. But, since there is no added value (economically), the per-share price sheet becomes smaller. The total effect of the stock dividend and stock split does not exist, in other words, the total value of the company (shares) will be the same.

The reason he does share dividends and Stock

  • Companies want to hold cash, but would also like to pay a dividend. The resolution is to pay stock dividends or stock splits.
  • The company wants to acquire the trading range that is considered ideal.
  • The company wanted to give a signal to the market. Empirical discovery suggests that prices will react positively at the time the stock split was announced.

Reverse Split

The Reverse stock split is the antithesis of spit (breakdown of shares). In a reverse split, some shares were merged into one stock.

In the real world, the reverse split is done for several reasons. First, stocks whose value is too small is often regarded as the stock is not good or not ' respectable '. Investors consider that company has the prospect of less well, and tends to be a low rate (underestimate). For that price sahamdinaikkan in order to approach the ideal range. Second, if the stock price increases, the cost of the transaction is expected to become increasingly small (the opposite of empirical discovery of the effects of the stock split). The smaller the transaction costs are expected to encourage the liquidity of the stock.

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