DIVIDEND & DIVIDEND POLICY INTRODUCTION

DIVIDEND & DIVIDEND POLICY:



CASH DIVIDENDS:



These are the cash payments from a company to shareholders .They can come in the form of regular, special or liquidating dividends. It reduces the value of the company's assets & the market value of equity.



STOCK DIVIDENDS:



These are new share distributions rather than cash dividends. The effect of stock dividend is to increase number of shares , EPS declines & the market price per share drops. The ownership & wealth position of the shareholders remain the same.



STOCK SPLITS:



IT divides each existing share into multiple shares thus creating more shares but there is no change in the owners wealth.

The result is no. of shares outstanding increases but the stock price,EPS & dividend per share decrease by proportional amount. The dividend yield, P/E ratio & Market value of firm remains the same.



SHARE REPURCHASE:



It is a transaction in which the company buy back its own shares.It has the same impact on the shareholders wealth as the cash dividend payment of the same.