Dividend policy:
key issue:
policy of dividend
- stable growth dividend
- fix rate (constant pay out ratio) dividend
- zero dividend
- residual approach
MM dividend irrelevent theory: patern of dividend paid have no effect the entity's value:
assuptions: perfect market, no transaction cost,reinvestmnet in NPV, no taxes, FCF no relation to dividend,
dividend capacity
retention policy
current and projected dividend capacity
price strategies of international transaction
forms of dividend payment
- cash payment
- script dividend-- bonus or free share equity instead of cash
- share buyback
factors affect dividend policy:
1. clientale effection
2. cash needed ---dividend capacity
3. signalling to market--cut in or increase
4. legal-restrict on dividend paid out
5. debt covenants- dividend capicity
6. tax implication- choice between capital gain and dividend
7. refinancial and investment -capital
gain from internal improvement or positive NPV new project, compare with dividend take off
8. inflation---purchase power panelty-WACC-ROC
avoid the remittance restrict for multinational company from investment subsidinaries:
1. internal transaction pricing
2. chages
3. lending
